PSEi wipes out nearly all of year’s gains

MANILA, Philippines (2nd UPDATE) – Local shares continued to plunge Monday, June 24, erasing nearly all of their gains in 2013, on news the US plans to reel in its stimulus program.

The benchmark Philippine Stock Exchange index (PSEi) fell 211.12 points or 3.42% to 5,971.05. This means the PSEi is holding on to a gain of only 1.9% from its 5,860.99 close on the first trading day of the year.

The broader all-share index went down 134.43 points or 3.52% to 3,686.58.

All counters were in negative territory, led by the financial index, which lost 4.69%.

Losers outnumbered gainers, 165 to 17, while 34 stocks were unchanged.

A total of 2.93 billion shares worth P8.6 billion were traded.

Global markets remained turbulent after the Federal Reserve’s announcement last week that the US economy looked in good enough shape for it to start rowing back on its $85-billion-a-month bond-buying scheme.

While the move shows the US economy is gaining strength, dealers fear it means there will be less cash in the financial system to invest.

“The local market decline is really because of foreign selling. Although it seems to be tapering off, there are still investors who are selling,” said Joseph Roxas of Eagle Equities.

“It is mostly the big companies with huge foreign investors in their books that are in red,” he noted.

Roxas said the PSEi may not hit the 7,000 mark this year like earlier expected.

“We may not hit 7,000… Probably just around 6,500 if we recover and other markets stabilize,” he said.

PSE president and CEO Hans Sicat however said the market decline was “an overreaction to global developments.” 

“There is a disconnect between good local economic fundamentals and the short term market psychology. The explanation that investors were reallocating back to developed markets is not exactly accurate, with real movements going from the equities market into cash in a period of high volatility,” he said.

In New York on Friday, the Dow gained 0.28% to 14,799.40, while S&P rose 0.27% to 1,592.43. Nasdaq lost 0.43% to 2877.94.

Regional markets were down Monday. Hong Kong fell 1.66% to 19,926.26, while Nikkei declined 0.02% to 13,227.02.

At the foreign exchange market, the peso weakened to P43.84 against the US dollar from Friday’s close of P43.72. – with a report from Lean Santos/Rappler.com and Agence France-Presse