Panic Grips the Philippine Stock Market

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.

1 thought on “Panic Grips the Philippine Stock Market”

  1. If you have the money though, these are also amazing times. Opportunity lurks all over out there. I bet Julio Tan, Henry Sy and all the other biggies are making strategic moves and will make a fortune from this period. Everything is on sale: businesses, real estate, stocks, etc. It just comes down to having the liquidity to start taking advantage of the bargains. Everything will rebound. But cash, piles of cold hard cash is the best way to weather the current economic situation.

    If we live long enough, one day we’ll look back like my Inay always does (“kung binili ko ‘yung lupa sa Tagaytay noong araw,” kung binili ko ‘yung lupa sa Makati noong araw, siguro mayaman milyunarya ako” and such) and shake our heads at the missed opportunities. Its a buyer’s market for those confident enough to hold on to their portfolios for an appreciable period, namely, at least two years or until such time that the market gains robust confidence.

    But then, how do the general populace appreciate market movements, when it goes up or down? Probably not much. But while the economic activity of the people could somehow infuse or reduce confidence in the market, the impact of the activity in the exchange is hardly felt in the pockets of our people. First of all, a stated in the post, only a minuscule part of our people are market players. But more importantly, its the fiscal and monetary policies of the government that direcly impact that economic activity. The Central Bank should control inflation so our shopper would less complain about high prices. Congress and Malacanang should negotiate a scheme with the IMF and World Bank to slash interest payment on our external debt. It is truly wicked when the country’s national budget allocates more money to interest payment than to public health and public education combined.

    Inflation, recession? Our people are have lived in those conditions for so long. My neighbor can’t even afford his beer and load anymore. Market crash? I’m sure he’ll say he didn’t hear any noise.

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