Why SM Investments lost P73 billion in a day

MANILA, Philippines – In less than an hour, SM Investments Corporation lost P73.479 billion worth of stock value, ahead of the main index rebalancing next week.

On Friday, March 10, shares in SM dropped by 9.24% or P61 to P599 each. This is the conglomerate's biggest decline since October 2008.

"We saw a market-on-close order from CLSA Limited [a Hongkong-based brokerage and investment firm], selling close to 500 million worth of SM. Given the size and nature of order, it looks like a foreign fund exiting," Luis Limlingan, managing director of Regina Capital Development Corporation, said in a mobile phone reply.

A market-on-close order refers to an order to buy or sell a stock and is executed near the closing price.

The drop in SM shares dragged the Philippine Stock Exchange index (PSEi), which fell 149.18 points or 2.05% to close at 7,146.27 on Friday.

The sharp drop caused SM Prime Holdings Incorporated to overtake SM Investments as the country's most valuable listed company in terms of market capitalization.

Market capitalization of SM Prime on Friday, March 10 is at P837.498 billion, while that of SM Investments stood at P721.545 billion.

'No fundamental reason' 

According to Corazon Guidote, senior vice-president for SM Investments' Investor Relations, there is no fundamental reason for the 9% drop in SM share price.

"It's just the market. On Monday, it's PSEi rebalancing. MOC orders are usually done by foreign traders. It is one of their characteristics. That is when they wait for the proper price average. This is just part of the strategy most foreign traders use," Harry Liu, president of Summit Securities Incorporated, said in a phone interview.

WEIGHT LOSS? On Friday, March 10, Shares in SM Investments record biggest slip since October 2008. Screenshot from edge.pse.com.ph

WEIGHT LOSS? On Friday, March 10, Shares in SM Investments record biggest slip since October 2008. Screenshot from edge.pse.com.

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The PSEi rebalancing is taking place on Monday, March 13.

Emperador will be removed from the 30-company index, replacing Puregold Price Club, a note from PSE showed.

Another source said weight in SM and Metro Pacific Investments Corporation will be decreased while weight in JG Summit Holdings and SM Prime Holdings Incorporated will be added.

A look at the PSE website showed that SM has an index weight of 9.82%.

"I don't see any crisis from SM. If there will be no developments, traders may flock [on Monday] and buy because of the lower price," Liu said.

SM Investments saw its net income grow to P31.2 billion in 2016, fueled by strong revenues in its property and banking units.

SM Investments told the local bourse on March 1 that its property unit accounted for 39% of total earnings. Banks comprised 37% and retail 24%.

"Our core businesses performed well and continue to grow in line with the country's strong economic development," SMIC president Harley Sy said in a previous disclosure. – Rappler.com