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PH stocks face its worst since 2008

An end to the bull market?

As if starting the year in the negative territory wasn’t bad enough, the local stock market just had to bear one of the worst weekly index closes at the start of the year as it stood too vulnerable to the string of bad news overseas. And this could get even worse.

While it has already been long accepted that the market just went through a year of “unmet expectations”in 2015, what has become more acknowledged now is the fact that the Philippine shares will undergo to so much more volatility this year amid the election season and the Federal Reserve hike.

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These factors have already been accounted for. What somehow came as a surprise are the geopolitical tensions between the Middle East and Iran and the fall of China stocks.

“This is shaping up as the worst start [first five days] for the market. The last time the Index closed in the negative after five sessions of the new year was in 2008 – a crisis year that eventually saw the PSEi [Philippine Stock Exchange index] and global markets halve its value,” said Justino Calaycay, analyst at Philstocks Financial, Inc.

Philippines shares stumbled on the first 2016 trading calendar shedding by more than a hundred points as global markets turned cautious over the crash of China stocks. By mid-week, the market went down again, following a quick and slight rebound on Tuesday.

Come Thursday, the market had its biggest drop for the year, falling sharply by 195.02 points, or 2.86 percent to close at 6,618.88.

This, according to Calaycay, is the 13th worst single-day drop of the PSEi, the second triple-digit slide this year.

It’s just five days since the market opened for the New Year, but it’s already obvious that it will stay on the red side on most part of the first half.

 

OVERSEAS WOES TAKING  TOLL ON PH STOCKS

China’s stock market on Thursday suffered its shortest trading day in its 25-year history after stumbling by more than 7 percent, sending negative signal to the global market, including Philippine shares.

It particularly sent the Philippine Stock Exchange index (PSEi) to its 13th worst single-day drop on record and its second triple-digit slide this year.

According to Calaycay, prior to Monday’s – 118.66 points slump, the most recent fall of this magnitude was recorded in August 24, 2014 at the heels of a Yuan devaluation.

Specifically, the benchmark Shanghai Composite Index closed after a shortened trading on Thursday with more than 7-percent decline. When the index falls or rises 5 percent, trading is automatically halted for 15 minutes, while a 7-percent move stops the trading for the remainder of the session.

It was also early last week when geopolitical tension rose between Saudi Arabia and Iran. Allies were also quick to side the Kingdom.

The United Arab Emirates downgrades diplomatic relations with Iran, hours after Saudi Arabia, Bahrain, and Sudan severties completely.

Throughout the whole week, pessimism lingered at the local bourse because of these issues.

 

PSE OPENS FIRST TRADING DAY OF 2016 – The Philippine Stock Exchange, Inc. (PSE) officials raise their glasses in a toast to welcome the new year and signal the first trading day of 2016. Shown (from left) are: PSE President and CEO Hans B. Sicat, PSE Director Alejandro T. Yu, PSE Chairman Jose T. Pardo, PSE COO Roel Refran, and Cornelio Gison, President of Capital Markets Integrity Corporation. (Federico Cruz)

PSE OPENS FIRST TRADING DAY OF 2016 – The Philippine Stock Exchange, Inc. (PSE) officials raise their glasses in a toast to welcome the new year and signal the first trading day of 2016. Shown (from left) are: PSE President and CEO Hans B. Sicat, PSE Director Alejandro T. Yu, PSE Chairman Jose T. Pardo, PSE COO Roel Refran, and Cornelio Gison, President of Capital Markets Integrity Corporation. (Federico Cruz)

VOLATILITY TO STAY

As time goes by, it is becoming more obvious where the market is heading at least for the first six months of the year. And that is towards more volatility.

“Note that volatility readings remain high so expect moderate to sharp intraday movements which will provide quick trading opportunities,” Regina Capital head of business development Luis Limlingan said in an interview.

“The volatility will persist up to the election,” he further said, adding that market participants will continue to sell heavily moving forward.

Calaycay also mentioned that most of the volatility this year will come from as far as the United States and as near as our own presidential election.

“We expect the overall economy to encounter serious challenges – investments may slacken off a bit for two main reasons. First, the improving conditions in the US [even as other developed economies remain on the edge] and second, the usual uncertainties that blanket an economy that is going through an important election of a new leadership,” Calaycay said.

He pointed out that the US economy is undeniably well on the road to recovery, adding that there may be some rough patches along the way, but generally, everything is reverting back to normal.

“It is this transition back to normalcy that will somehow send tremors of various magnitude across financial markets. In particular, each meeting of the US Federal Reserve will continue to be watched with heightened interest – along with the weekly and monthly economic data releases that may point to the pace of rates adjustments the regulators will take,” Calaycay said.

“Of course, a stronger US economy and higher interest rate contribute to a stronger currency – alternatively, a weakness in the Philippine peso,” he added.

 

THE ROAD TO ELECTION

Historically, the market is on an uptrend before and after the election but there are days in between that participants and businessmen are nothing but uncertain towards it.

“Our concerns over the elections are two-fold. One, it should give rise to good business in the fields of consumer retail, communications [mobile phones, SMS, Internet, etc], transportation and media. Additionally, it should provide employment a good number at least for the next six months,” said Justino Calaycay, analyst at Philstocks Financial, Inc.

This, according to him, is the “good side” of the elections.

The bad side comes when businessmen and the investment community start to be uneasy about who will be the next president, whether he will make it easy for investors to do business in the country or not.

“The question of who will eventually succeed President Benigno S. Aquino III in Malacañang presents a degree of uneasiness to the business and investment community.

This risk cannot be avoided – not particularly so since not one of the candidates have so far made clear their economic programs and policy orientations with respect to specific sectors of society,” Calaycay pointed out.

“We haven’t even mentioned how they will fare in the area of good governance. But as history has shown, each and every presidential election year in the post-Marcos era have translated to positive annual results in the PSEi,” he added.