The Philippine Stock Exchange plunged 12.3% yesterday, the biggest one day loss in its recent history.
The unprecedented drop forced officials to temporarily stop trading, also a first for the PSE.
The “circuit breaker rule” was imposed after the main index fell by 10%. The trading floor imposes an automatic 15-minute halt to trading if the PSE index falls by at 10 percent. The rule is designed to calm down emotional selling. To no avail, as sellers dumped shares after the break in a frenzy of panic-selling.
According to BusinessWorld, the total value of all 241 firms listed on the PSE was P7.98 trillion at the start of the year.
As of yesterday this was down to P4.75 trillion, or a 60% loss in value, much of it in the last few months of global financial turmoil.
Alejandro “Ali” Yu, president at RS Lim and Co, was quoted as saying:
There was a massive selldown across the board. There’s no other word for it but a bloodbath.
PSE president Francis Lim acknowledged:
This is the first time in history something like this happened. It’s really because of what happened to global markets last Friday. It’s not surprising.
Shares of the country’s second largest bank by assets, Banco de Oro, dived 24% after it reported a third-quarter net loss of P1.3 billion, primarily due to provisions for its exposure to bankrupt Lehman Brothers.
The worst is yet to come, as fearful investors threaten to drag the global economy closer to recession.
Analyst Dr. Carl Weinberg, of High Frequency Economics, said in New York:
If the fall in markets has its origins in the fear of an international recession, then the coming week will be very bad. The economic calendar is full of indicators that will be uniformly atrocious.
The problem with fear is that it’s highly contagious, like a virus infecting markets worldwide. You can’t stop it. Reason will not prevail in collapsing markets.
The average Filipino won’t feel the effects of the impending crash, at least not immediately, as only a miniscule part of the population are market players. But a few months from now, as we enter what could possibly be a prolonged recession, there will be economic dislocation and restiveness. Not even OFW remittances will save us, as the economies which hire our workers will themselves be the hardest hit.
There is little we can do except brace ourselves for more turbulence.