Stocks plunge to lowest level in 4 years

Coronavirus spread sends index into bear territory

MANILA, Philippines — Stock markets in Asia collapsed yesterday in a rout not seen since the fall of global investment banking giant Lehman Brothers in 2008.

Philippine equities were no exception, with the benchmark Philippine Stock Exchange index (PSEi) plunging by 457.77 points, or 6.8 percent, to close at 6,312.61 officially making its way back to bear territory after falling more than 20.07 percent from the Nov. 20, 2019 close of 7,898.06.

The broader All Shares index also plummeted by 224.33 points, or 5.55 percent, to end at 3,815.22.

The rest of the sectors took the cue, resulting in a bloody trading session yesterday, one of the worst days in market history.

The main composite index’s 6.76 decline yesterday marks the biggest one-day percentage drop since Oct. 27, 2008’s 12.27 percent decline and the third biggest loss since the start of 2008, data from the Philippine Stock Exchange (PSE) showed.

It is the lowest close since Jan. 26, 2016 when the index closed at 6,311.60 and the biggest one-day drop in points since Aug. 24, 2015.

But ultimately, traders said yesterday’s close also brings back memories of the period after the Lehman collapse in 2008 which was triggered by the housing mortgage crisis in 2008, traders also said.

The culprit is largely the lingering impact of the coronavirus disease 2019 or COVID-19 as worries over local transmission and its impact on the economy escalated over the weekend after the Department of Health confirmed additional confirmed cases.

As of this writing, the number of confirmed cases in the Philippines has risen to 10, including confirmed local transmission.

There are now 110,110 confirmed cases of the virus and 3,831 deaths across 109 countries.

Total value turnover reached P6.3 billion. Market breadth was widely negative in favor of decliners with  204 losers and 30 gainers, while 23 issues were left unchanged.

Traders said that aside from worries over COVID-19, the oil price war is adding to investors’ woes, said Ed Francisco, president of BDO Capital & Investment Corp.

“The oil price war won’t help. Foreign markets are showing extreme skepticism so we will just have to watch and react. But good that we are on red alert and our health and local officials are monitoring the situation closely,” he said.

The Organization of Petroleum Exporting Countries failed to strike a deal with its allies regarding production cuts, causing Saudi Arabia to slash its prices. This led to fears of an all-out price war.

Francisco said it is also good that businesses are preparing plans to minimize the spread and by allowing work from various locations.

First Metro Investment Corp. head of research Cristina Ulang said the market is also surrendering to fear of the unknown.

“The selldown is market’s fear of the unknown. There are lots of unknowns at this point regarding the speed of local infection spread, economic slowdown and effectiveness of government containment measures,” Ulang said.

Astro del Castillo, managing director of First Grade Finance Inc. believes that the DOH’s issuance of a code red alert has caused panic in our local market.

“The uncontrolled outbreak globally and its negative impact to the world economy has further injected fear to investors,” Del Castillo said.

For now, he said it’s so difficult to say when or at which level will the sell-off stop.

“More information on our government’s continuity program will help bring more stability to the market,” Del Castillo said.