Market players said the selling was an over-reaction considering that the main index was already deep in oversold territory.
"There is nothing fundamentally which would make this market a sell. It (selling) is overdone...The index is almost calling out to investors to buy," said Efren Cruz, fund manager of The Mutual Fund Management Co. of the Philippines which handles funds of about P280 million.
The 33-share Philippine Stock composite index (Phisix) tumbled 34.66 points, or 2.36 percent to end at 1,431.57, its lowest close since December. During the session, the index reached intra-day lows last seen during the tumultuous end of the administration of deposed president Joseph Estrada in January this year.
PLDT which led the losers, gave up P40 to end at P700, its lowest close since August 11. The phone firm’s ADR in New York lost 60 US cents to settle at $14.90. PLDT accounted for more than 30 percent of total foreing selling valued at P274 million.
Traders said a new slide of the Dow Jones and the overnight losses of PLDT overwhelmed any positive sentiment stirred by fresh cut in Bangko Sentral ng Pilipinas’ overnight rates.
For next week, however, traders expect the market to enjoy a "technical bounce" as investors scoop up bargains.
"It seems the market is ripe for a technical bounce," said Astro del Castillo of A and A Securities Inc. "This is a buying opportunity."
However he warned that the local market still remain highly dependent on overseas developments, particularly in the economies of the United States and Japan, the country’s two largest trading partners.
"We cannot deny the fact that we are not immune to what is happening abroad with the two biggest economies slowing down," del Castillo remarked.
Caution over national elections in May will also temper investor interest, he said.
Although the Philippine economy may show some improvement by July, in the short term the local market "will test the 1,400-level. Hopefully it doesn’t break the 1,350-level," del Castillo said.
For his part, Robert Cano of BPI Securities said investors would like to see a pro-Arroyo Congress in the coming election to ensure that government initiatives for reforms will be supported in the legislature.
"The market seems to be waiting also for key reform bill to be passed such as the power reform bill which government said it will prioritize for legislation after the May elections," Cano said.
Edser Trinidad, senior analyst at BNP Paribas Peregrine Securities, said the market just reflects investors lingering concerns over the possible slowdown of US economy, which remains a major market for Philippine exports. More than a third of Philippine exports go to the US.
Despite the gloomy outlook, Trinidad said some investors may take the market’s 4.5 percent week-on-week fall as window to start "cherry picking."
The market drop was broad-based as the number of decliners edged gainers, 45 to 24, with 31 other issues unchanged. Turnover, however, slightly improved to P486 million from P420 million on Thursday.
Other index -linked issues that closed lower were Ayala Land, Ayala Corp., SM Prime, San Miguel, ABS-CBN, Filinvest Land, Benpres Holdings, Petron, Megaworld, JG Summit, ICTSI, Digitel and Fil-Estate.
Gainers, on the other hand, include Meralco B, Piltel and DMC Holdings.