Philippine stocks slide into bear market territory

By Denise A. Valdez
Reporter

PHILIPPINE STOCKS plunged by nearly seven percent on Monday, its biggest decline in more than a decade and setting the stage for a return to bear market territory.

Analysts attributed the stock market’s steep decline to increasing concerns over the economic impact of the coronavirus disease 2019 (COVID-19) outbreak.

President Rodrigo R. Duterte on Monday declared a public health emergency to help contain the spread of COVID-19, as the Department of Health announced 10 new cases, all Filipinos. This brought the total number of COVID-19 cases in the country to 20.

The benchmark Philippine Stock Exchange index (PSEi) slid 457.77 points or 6.76% to close at 6,312.61 yesterday, as it headed into bear territory. The PSEi now is down 19.23% from its close at the end of 2019.

A bear market is when the main index falls at least 20% from its most recent peak, which in the case of the PSEi was 8,419.59 on July 16, 2019. The decline of 20% or more should typically be sustained for around two months.

The market’s finish on Monday was its lowest since Jan. 26, 2016, when it closed at 6,311.60. It was also the biggest one-day decline since Oct. 27, 2008 when it fell 12.27%.

“As foretold by the death cross which appeared in December 2019…, the market is in bear territory,” Philstocks Senior Research Analyst Japhet Louis O. Tantiangco said in a text message.

He said the main culprit for the major sell-off is the rising number of COVID-19 infections in the country.

“Worries have escalated on the negative economic impact of the epidemic from tourism, to foreign trade and investments, to supply chains, to possible work suspensions, to consumption, and ultimately, to the laborers who will be the number one victims once the spread worsens,” Mr. Tantiangco said.

While other countries such as China, South Korea and Japan have reported hundreds of COVID-19 cases, the Philippines went for nearly a month without new cases since the Department of Health (DoH) first announced three cases in early February.

PNB Securities, Inc. President Manuel Antonio G. Lisbona said this may be a reason why the market fell significantly when new coronavirus cases, including the first case of local transmission, were announced last week.

“I think the impact of COVID-19 on the Philippines was more of a catch up, in the context of our somewhat delayed reporting of cases given the seeming difficulties in coordination between health care facilities and the DoH,” he said.

“Add to that the unwillingness/fear to report by persons who feel sick. Because of this, it seems that investors think that the number of cases is understated,” Mr. Lisbona added.

For Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, the decline of the PSEi is coming on top of an already volatile market hurt by regulatory uncertainties fueled by the President’s tirades against certain listed firms, and natural calamities that hit the country since December 2019.

“Going forward, coordinated global measures to further contain the coronavirus would be a major catalyst for the global economy and financial markets, as well as any further monetary policy easing, liquidity infusions, and other stimulus measures (including fiscal policy stimulus) to at least shore up or even boost confidence on the global economy and financial markets,” Mr. Ricafort said in mobile text message.

However, the stock market is expected to remain bearish until there are indications the spread of the COVID-19 is slowing or is now under control.

“The market will stay bearish until investors see evidence of a tapering of new infection cases being reported, and this we have no way of forecasting,” PNB Securities’ Mr. Lisbona said.

“The current crisis is not just a demand-side problem where consumers aren’t spending, it’s also a supply-side problem where the disruption in global supply chains are causing difficulties in production. The recent policy rate cuts only provide stimulus on the demand side,” he said.

Philstocks’ Mr. Tantiangco added: “Our economic managers can only do so much… By the end of the day, we are facing a health problem which could only be addressed by a cure.”