MANILA, Philippines — Local equities continued their decline for the second day on Tuesday, tracking a regional downtrend after US crude prices crashed to the negative territory in an unprecedented collapse propelled by crippled demand and a supply glut.
The bellwether Philippine Stock Exchange index (PSEi) dropped 2.47% or 141.40 points to close at 5,592.25. The broader all-shares index similarly declined, albeit at a slower pace of 2.42%.
Broken down, the mining and oil sub-index led a wipe out across industries, falling by a faster 2.89%, demonstrating the impact of sinking oil prices. The sub-index was followed by declines in industrial (-2.56%), services (-2.48%), property (-2.43%), holding firms (-2.39%) and financials (-2.23%).
Decliners trumped advancers, 140 to 49. Forty-four names were unchanged.
“Local shares fell as investors watched oil futures crash, overshadowing optimism about plans for a staggered easing of global lockdowns in the wake of the COVID-19 pandemic,” Luis Limlingan of Regina Capital said in a market commentary.
Oil prices in the US sank to as much as -$37.63 overnight, indicating that refiners are already willing to pay people to buy their output sitting idly in depots and incurring them storage costs.
While the Asian benchmark Dubai crude has stayed at $32.6 for March deliveries, sliding US oil indicates prices in the region may be next to collapse. Brent crude, the international benchmark, was changing hands at $25.75 for June delivery.
While generally the Philippines is a net oil importer and should benefit from lower oil, the costs this time trump the benefits as local consumption and investment slow due to state-imposed movement restrictions meant to put the outbreak under control.
On top of a weaker domestic economy, 57% of Filipino migrant workers were likewise based in the oil-rich Middle East as of 2017, meaning an oil price slump is feared to prompt companies in the region to lay off workers there.
“The collapse in WTI “was driven by a precipitous drop in demand caused by the market expectation that the US lockdown could continue into May,” said Tai Hui at JP Morgan Asset Management.
“This isn't surprising, given flights are grounded and people are driving much less for work and leisure. If the economic reopening takes longer than expected, we could see pressure further out in the futures curve,” he added.
Elsewhere, equity markets were deep in the red, having enjoyed a healthy couple of weeks thanks to massive stimulus measures and signs of an easing in the rate of new infections globally.
Tokyo ended the morning 1.6% lower, while Hong Kong, Sydney, Seoul and Taipei were also more than one percent lower.
Shanghai and Singapore both shed 0.8%, and there were also losses in Jakarta and Wellington.
Analysts warned the drop in stocks could be an indication that the recent surge may have been too much too quick and another sell-off is possible. — with AFP