Shares decline on fresh US-North Korea tension

TENSIONS between the US and North Korea weighed on Asian markets, pulling down with them local equities, analysts said.

The Philippine Stock Exchange index (PSEi) on Tuesday gave up 74.59 points or 0.9% to close at 8,170.14.

The wider all-shares index also lost 30.79 points or 0.63% to end the session at 4,831.86.

“Weakness in the US and escalation of warlike rhetoric between [Donald J.] Trump and Kim [Jong Un] led to risk-off behavior,” said Miguel A. Agarao, vice-president of Philequity Management, Inc.

“This affected Asian markets, including the Philippines, with the correction here exacerbated by EDC’s sharp drop,” he added, referring to Energy Development Corp. (EDC), which was removed from the main index.

The PSE announced that EDC had been removed from the PSEi as its free float level fell below the 12% minimum requirement to qualify as a main index constituent. Shares in Lopez-led EDC fell by 20% to close at P4.80 each.

EDC will be replaced by Robinsons Retail Holdings, Inc.

Mr. Agarao also cited “heavy foreign selling” as one of the reasons for yesterday’s slide. Foreigners were net sellers of stocks worth P1.16 billion, a reversal of the other day’s net buying of P8.82 million.

Luis A. Limlingan, business development head at Regina Capital Development Corp., said Philippine and US indices fell amid a fresh flare-up in tensions between the US and North Korea and a sharp decline in technology shares. 

Bloomberg reported that US National Security Adviser H.R. McMaster sees the threat from Pyongyang as “much further advanced” than anticipated. The Pentagon also said the US president has a “deep arsenal” to draw upon if needed.

But US officials dismissed North Korean Foreign Minister Ri Yong Ho’s comment that Mr. Trump’s warnings to Pyongyang at the United Nations amounted to a declaration of war.

Sectoral indices retreated, save for services, which advanced by 3.58 points or 0.21% to 1,705.77

Mining and oil led the decline as it dropped 340.22 points or 2.39% to 13,865.39. Industrials lost 168.89 points or 1.51% to 11,009.8; property went down by 51.06 points or 1.3% to 3,860.43; financials gave up 15.07 points or 0.76% to 1,964.88; and holding firms dropped 35.22 points or 0.42% to 8,284.97.

Losers outnumbered gainers at 138 to 63, while 53 stocks finished unchanged. Trading value was at P9.61 billion, higher than the previous day’s P6.76 billion, with 2.22 billion shares changing hands.

Most Southeast Asian stock markets fell in line with broader Asia on Tuesday as investors sought shelter in safe-haven assets with tensions flaring up again on the Korean peninsula.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell as much as 0.5% to a near three-week low and was last down 0.3%, following losses on Wall Street. — Victor V. Saulon with Reuters