(Mar 19): Philippine stocks resumed trading from a controversial two-day shutdown with the index posting its biggest intraday-loss in 33 years.
The Philippine Stock Exchange Index opened with a 24% drop in Manila, bringing this month’s loss to about 40%, the worst performer in Asia. As trading resumes, the lowest valuation in 11 years, prospects for a 50 basis point rate cut and a 27 billion peso ($752 million) fiscal stimulus collided with fears of the coronavirus spreading.
See: SGX to prioritise keeping markets 'available and accessible' even as Philippines shutters exchange amid Covid-19 panic
“There’s still more volatility along the way, mainly because the virus is affecting local and global GDP,” said Robert Ramos, who helps manage US$686 million ($986 million) as chief investment officer of East West Banking Corp. “Foreign investors more than anything are still risk off. They have been leaving emerging markets” and going to US Treasuries, he added.
The closure of equity, currency and bond markets started on Tuesday, following the government’s decision on Monday to widen a month-long lockdown of the capital region to cover the country’s main Luzon island, home to at least 57 million people. All stock trading activities will be conducted remotely when trading resumes, the Philippine Securities and Exchange Commission said Wednesday. Foreign investors have sold US$480.5 million net of local stocks this year, the fastest withdrawals since Bloomberg began tracking the data in 1999.
A US-listed exchange-traded fund that tracks Philippine shares sank by a record 19% on Monday after the bourse announced it was shutting, before rebounding 8.1% on Tuesday. It fell 10.1% Wednesday in New York.
The Philippines has 202 confirmed infections so far, with 17 deaths. The nation’s central bank governor, Benjamin Diokno, said Wednesday there will be “large and protracted” adverse economic impact if the Luzon-wide community quarantine to fight the virus outbreak fails.
Many of the biggest Philippine companies have already taken a hit. Property giant SM Prime Holdings Inc. has shut 63 of its 74 shopping malls. Retailer Robinsons Retail Holdings Inc., which has many stores in malls, has also warned of slower earnings growth due to the public health emergency.
Jun Calaycay, a strategist at PhilStocks Financial, said the nation’s benchmark index could fall to 4,700, a 12% drop from Monday’s close, should the 5,000 to 5,100 support level fail to hold. A prolonged pandemic could send the gauge down 56%, matching its slump from peak to trough during the 2008 global financial crisis, he added. Since a record high in January 2018, the gauge has already tanked 41%.
“It’s hard to say whether we have hit a bottom for there are still many headwinds ahead,” Calaycay said. While the inflow from the government’s financial institutions will provide some support, “what is certain is we are in a bear territory that could last until the virus is contained,” he added.