Index falls to lowest level in over a year

MANILA, Philippines — The stock market slumped yesterday, pushing the main composite index to its lowest level in more than one year following a global selloff triggered by Italy’s political crisis.

The benchmark Philippine Stock Exchange index (PSEi) plunged by 132.22 points to close below the 7,500 mark at 7,470.14.

This was the lowest close since April 4, 2017 when the index settled at 7,446.49.

Likewise, the broader All Shares index tumbled  69.36 points, or 1.50 percent, to finish at 4,571.31.

The rest of the sectoral indexes  were down, except for the mining and oil gauge.

Total value turnover reached P7.359 billion,  up from Tuesday’s P6.106 billion. Market breadth was negative, 132 to 56 while 49 issues were left unchanged.

Year-to-date net foreign selling in the market has now reached almost a billion dollars or $940 million as of May 29, according to DA Market Securities.

Traders  attributed  the sharp downturn to global uncertainties which was exacerbated by the political turmoil in Italy and Spain and the lack of market-moving news in the local front.

Analysts said Italy’s political crisis toppled the euro to a 10-month low, pushing up Italian borrowing costs and sending investors rushing to safe-haven assets such as US Treasuries.

“Our index fell after an announcement from the US government about the list of goods from China which will be slapped with tariffs, sparking fears in the markets. The worsening political crisis in Italy has been making investors sentiment subdued as the populist party, Five Star League bared their exist plan from the euro zone,” a trader said.

All these developments are causing fear among investors which is why the market is witnessing a selloff, he said.

Astro del Castillo, managing director at First Grade Finance Inc., shared the same view.

“We were not spared from the troubles in Italy. The local market reacted the same way as most markets. The uncertainty in Italy is really jolting the markets since it could trigger another financial crisis in the euro zone,” he said

Investors fear that repeat elections in the euro zone’s third-largest economy – which could come as soon as July – may become a de-facto referendum on Italian membership of the currency bloc and the country’s role in the European Union.

In the local front, Del Castillo said the inflationary effect of a weaker peso continues to push investors on the sidelines.

At yesterday trading at the Bankers Association of the Philippines,  the peso hit an intraday low of 52.755 to $1 on geopolitical concerns in the euro zone as well as the impending release of additional liquidity into the financial system following the cut in banks reserve requirment ratio.

The peso opened weaker at 52.715 but rallied to close at 52.60 to $1, four centavos stronger than Tuesday’s close of 52.64 to $1. Volume slipped slightly to $686.1 million from $712.05 million on Tuesday.

Moving forward, Del Castillo said the market could test the 7,400 psychological support level given the red flags.

Luis Limlingan of Regina Capital said Italian stocks led the decline and bond yields jumped on worries that Italy may be forced in to a general election that would serve as a referendum on the euro and is reviving worries about the stability of the euro zone.

“If that wasn’t enough to cause disruption, there was continued US-China trade tension. In a statement Tuesday, the White House said a final list of targeted imports will be released by June 15 and the tariffs will be imposed ‘shortly thereafter,” Limlingan said. – With Lawrence Agcaoili, Reuters