RP shares plunge to lowest in 4 years

MANILA, Philippines – The stock market shuddered yesterday from crumbling share prices across Asia, plunging more than 12 percent – the steepest dive in four years – in raucous sell-offs that forced a 15-minute suspension of trading.

The index lost 239.66 points to close at 1,713, its lowest in more than four years. Turnover was thin at 1.1 billion shares worth P1.6 billion with 123 issues down, 13 unchanged and five up.

The bourse had to suspend trading to provide a cool-off period after the tailspin in prices reached 10 percent.

It was the first time the bourse had enforced a 15-minute trading halt since it instituted the safety measure – called the circuit breaker rule – last month as shock waves from the US sub-prime mortgage crisis began to spread around the world.

The main index plunged 194.33 points to 1,759.16 when trading was stopped from 11:23 a.m. to 11:38 a.m. to dampen the selling frenzy.

The day’s biggest losers up to that time were Export and Industry Bank, a small lender that is down nearly 39 percent, and the Philippine Stock Exchange, which saw shares down 30.4 percent.

“There’s no other word for it but a bloodbath,” said Alejandro Yu, president at RS Lim and Co. “There was a massive selldown across the board.”

Shares of Banco de Oro dived 24 percent after the country’s second largest bank by assets reported a third quarter net loss of P1.3 billion primarily due to provisions for its exposure to bankrupt Lehman Brothers.

PSE records show that the 12.27 percent decline was the biggest single day percentage drop and also the biggest one day point drop after Feb. 28, 2007 when the PSEi shed 263.84 points. 

“We’re suffering as much as the rest of the world and this is not caused by internal matters but by the developments overseas,” said PSE president Francis Lim.

“The problem with panic selling is that investors are selling out of pure emotion rather than based on fundamentals. Almost every market crash is a result of panic selling,” Lim said.

Among the stockmarket’s sub indices, the services sector was the hardest hit plummeting 13.25 percent followed by the holding firms, which lost 10.69 percent and financials, 10.52 percent.

Astro del Castillo, managing director at First Grade Holdings Inc., said local stocks will continue trading downward for the rest of the week on growing fears of a protracted global recession which could affect the region’s economies.

“Selling seems almost unstoppable because of uncertainty over the crisis. Doubts are growing over whether the sinking global economy will recover quickly,” Del Castillo said.

Other Asian markets extended their losses amid skepticism that moves by policy makers will be enough in the short-term to stave off erosion of economies or sharp drops in corporate earnings.

Local stock investors are expected to continue getting hints from developments overseas, and more are likely to seek safer investment havens. A slew of economic indicators and corporate results are due this week in the US, Europe and Japan.

The US Federal Reserve is expected to cut interest rates tomorrow from the current level of 1.5 percent.

Palace unfazed

Malacañang was unfazed by the development as it called on Filipinos to remain calm.

“There is present volatility and that is not only in the Philippines. It’s more serious abroad and we are just responding to an international event and that is all the more reason why we should strengthen our trade and investment especially in commodities in the Philippines,” Press Secretary Jesus Dureza said.

“But in the stock market they come and go, they go up they go high, but we should not lose sight of the fact that our strength as a haven for investments is still very strong,” he said.

He said investors, including Chinese businesses, are optimistic about their prospects for profit in the country.

Socioeconomic Planning Secretary Ralph Recto said the dismal trading at the bourse was expected since many major bourses around the world closed on historic lows on Friday.

“The same thing naturally will apply to us but for the US economy and those in Europe, that was expected since earnings of companies there are down. But here companies are earning, I think it’s more of panic,” Recto said in a telephone interview.

He said a check with the PSE showed that local companies are buying back their shares indicating that they’re still confident of good earnings prospect. – With Paolo Romero