Bloodbath in market as US crisis worsens

08/17/2007

The bloodletting intensified at the financial markets yesterday as the stock index fell through the 3,000 mark while the peso dipped to 46.43 from 46.23 the previous day despite suspected Bangko Sentral ng Pilipinas (BSP) intervention.

The peso touched an intra-day low of 46.70 at the floor of the Philippine Dealing System.

Investors moved out of riskier assets amid jitters about the sub-prime lending crisis in the United States, dealers said.

Share prices closed 6.0 percent lower, amid a regionwide tumble after Wall Street skidded for the fifth straight session on persistent credit market worries, dealers said. The composite index lost 188.03 points to 2,942.31.

The index at the Philippine Stock Exchange was down 107.59 points or 3.4 percent at 3,022.75 points less than an hour after trading opened, having closed 4.1 percent down on Wednesday.

Traders said the BSP was seen selling dollars in the market at 46.50 to stem the peso’s decline.

“The dollar-peso (rate) will continue to be influenced by external factors with sub-prime mortgage concerns the driving factor for the greenback’s renewed vigor versus emerging market currencies,” a trader at a local commercial bank said.

“Further routs in the equity market will see more peso weakness ahead.”

Ron Rodrigo of Unicapital Securities said the sharp retreat on Wall Street despite more funds injected into the banking system by the US Federal Reserve reflected deeper investor anxiety. Locally, he said investors are no longer focusing on the economy and corporate earnings.

“The fact that US equities dropped despite the Fed’s move created a dilemma for local investors. It is obvious that investors are looking for clearer signals that the sub-prime and credit crisis can really be contained and prevented from spilling into other economic sectors,” Rodrigo said.

Dealers blamed the US plunge that saw the Dow Jones industrials close Wednesday below the 13,000 mark for the first time since April, despite the Federal Reserve’s move to inject more cash to the banking system.

The all-share index fell 105.99 points to 1,901.86. There were 143 decliners and only six advancers, with 13 stocks unchanged. Volume amounted to 5.5 billion shares worth P4.9 billion.

“People are selling their stocks as if they don’t have value at all. Where it’s going to stop, nobody knows,” DA Market Securities Nestor Aguila said.

“Uncertainty lingers although I think we’re now at ground zero and a number of stocks, including some blue chips, are ripe for bargain-hunting,” he added.

“It’s a global situation,” said Allan Araullo, research head of Regina Capital Development Corp., remarking that not even positive corporate figures in the Philippines could overcome this.

“It really depends on the US market. They have to calm down first.”

Araullo said it was a case of “emotion taking over the global market,” remarking that despite the concerns over the sub-prime mortgages, “the data show the US economy is still strong.”

Index leader Philippine Long Distance Telephone fell P195 to 2,270. Metropolitan Bank and Trust — the nation’s biggest lender by assets — shed P3.50 to P49.50. Bank of the Philippine Islands plunged P4.50 to P54.50 and Banco de Oro slid one to P54. Conglomerates were also hit, with Ayala Corp. down 15 at P417.50 while SM Investments fell P12.50 to P320. San Miguel saw its A shares fall by four to P62 while its B shares slid by P3.50 to P65.

Elsewhere, Asian stock markets endured one of their most brutal selloffs in recent years with dramatic falls of more than five percent on some bourses as the fallout from US mortgage woes escalated.

Markets buckled under a wave of selling as the growing fallout from turmoil in US credit markets prompted investors to flee to safe havens such as bonds.

From Tokyo to Sydney, Hong Kong to Mumbai, weary stock dealers’ screens were awash with red again as fears over problems in US sub-prime mortgages to high-risk borrowers continued to buffet stock markets around the world.

Australian home loan group RAMS sparked fresh jitters after it failed to roll over five billion US dollars in debt due to worries over the US credit crunch, which also wreaked havoc on currencies, sending the yen soaring.

In a nerve-wracking day for investors. Seoul reeled from its biggest ever one-day plunge in terms of points, ending down 6.93 percent, but in some markets stocks managed to recover ground in late trade. Tokyo’s Nikkei-225 index fell below the key 16,000-point level for the first time since November before clawing back to end down 1.99 percent.

Hong Kong tumbled 3.3 percent as Singapore dived 3.7 percent. India was down 4.48 percent while Manila closed 6.0 percent lower.

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