No relief yet for local stocks from US crash

LOCAL share prices will continue their dismal tone this week, as they continue to absorb developments in US financial market, analysts said.

"For [this] week, we expect the market to remain jittery as the ripple effects of the US financial turmoil are just starting to trickle into the global economy," DBP-Daiwa Securities, Inc. said.

The same sentiment is shared by Maria Arlysa E. Narciso of AB Capital Securities, Inc. who said there is still no assurance of market recovery in the near term for the Philippines as the local index will still continue its reliance on the reaction of the foreign markets in the coming days.

The Dow Jones industrial average on Friday has again lost 1.49% or 128 points to 8,451.19, while the Standard & Poor’s 500 index shed 1.18% or 10.70 points to 899.22. The Nasdaq Composite index meanwhile managed to gain 0.27% or 4.39 points to 1,649.51.

"A relatively ’quiet’ opening is expected at the start of the week, as players digest Wall Street’s volatile swing last Friday. Most [investors] might check for prospective sell-offs from foreign houses, to gauge if this stance has already ebbed for the market’s blue-chip stocks," 2TradeAsia.com said.

The online brokerage firm said bargain lookers might bid for more time before they enter the market again, although the huge drop in the crude’s future on Friday might provide some incentive for them to gradually position on oversold shares.

Light, sweet crude for November delivery plunged to its 13-month low, losing as much as $9.50 to close at $77.09 a barrel on the New York Mercantile Exchange.

Nevertheless, 2TradeAsia.com said predicting an end to the "global portfolio liquidation" process will be the toughest challenge for investors, as anxieties to an acceptable solution to the global financial crisis persist.

The Philippine Stock Exchange index last week posted its largest drop since August of the Asian Financial Crisis, crashing for five consecutive days by 18.3% or 468 points to 2,097.80 week-on-week. No stock was spared from the sell-off.

All six subindices also suffered a double-digit drop week-on-week — industrial stocks tumbled by 20.72% to 2,379.19; property companies plummeted by 19.77% to 689.74; holding firms went down by 18.53% to 1,087.79; the services sector shed 15.79% to 1,270.42; financial stocks lost 15.17% to 546.52; and mining and oil companies slipped by 14.86% to 4,985.26.

Foreign investors last week were also seen unloading their stocks, posting a net foreign selling of P3.20 billion for the entire week. That has brought the year-to-date net foreign selling to P30.38 billion.

Despite the continuous downward spiral in the market and foreign investors’ exit from risky markets, DBP Daiwa Securities said the local market still has a long way to go before it dries up.

"We believe investors will become wary of the companies’ bottom line to contract in the coming months due to the global economic slowdown. Moreover, we feel that the market is slugging it out to maintain at current levels while investors remain bearish," DBP Daiwa Securities said.

The local brokerage firm, however, said that long-term investors could opt to start building up their portfolio while share prices are beaten down and are at discount levels.

This week, DBP-Daiwa Securities said the main index is seen to trade within the range of 2,200 to 1,800 levels.