Shares suffer bloodbath on US-China trade row

By Arra B. Francia
Senior Reporter

LOCAL EQUITIES suffered a bloodbath last week alongside global markets after the United States delivered on its promise to more than double tariffs on $200 billion worth of Chinese goods.

The benchmark Philippine Stock Exchange index (PSEi) shed 0.17% or 13.42 points to close at 7,742.20 on Friday. It plunged 2.83% or 225 points on a weekly basis, weighed down by the mining & oil and property counters, which fell 5.3% and 3.6%, respectively.

Market breadth was negative with an average of 115 losers versus 77 winners last week. Foreign investors also switched to a net selling position worth P541 million on a daily average, versus the previous week’s net inflows of P149 million.

“The sudden 180-degree tariff deadline warning from President Trump cast a pall on sentiment across markets during the week, pulling the PSEi 225 points lower,” online brokerage said in a weekly market note.

The US raised tariffs on $200 billion worth of Chinese goods to 25% from 10% last Friday, escalating tensions between two of the world’s biggest economies. This came amid US President Donald J. Trump’s claims that negotiations with Beijing were going too slowly.

Wall Street indices managed to end higher last Friday after a four-day losing streak due to trade war concerns. The Dow Jones Industrial Average climbed 0.44% or 114.01 points to 25,942.37. The S&P 500 index firmed up 0.37% or 10.68 points to 2,881.40, while the Nasdaq Composite index added 0.08% or 6.35 points to 7,916.94.

“Global markets are bound to err on the side of caution, until weak sentiment clears from the tariff spat between US and China. Prospects of higher consumer prices are in store as tariffs are passed on to end-users, as attention veers o repercussion of the macro measures will create on two dominant economies,” said.

Local gross domestic product (GDP) figures were of no help for the PSEi either, as the Philippine Statistics Authority (PSA) reported that the economy expanded by just 5.6% in the first quarter, much lower than the market consensus of 6%. Analysts blamed the delayed passage of the 2019 budget for the slower economic growth.

Aside from the GDP report, the PSA also released inflation data last week, which showed that the average rise in prices of widely used goods slowed to a 16-month low of 3% in April.

The Bangko Sentral ng Pilipinas also cut interest rates by 25 basis points during its policy meeting last Thursday.

“The bottom line is investors continue to be cautious and even took money off the table [last] week which caused more weakness in the market,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.

Mr. Mangun added that the exit of foreign investors from the PSEi last week may have been the bigger factor on why it ended lower.