‘Brexit,’ Trump uncertainty spook local stocks

LOCAL STOCKS dropped for a fifth consecutive session, as investors continued to await clarity on the planned exit of the United Kingdom from the European Union (EU) as well as US president-elect Donald J. Trump’s economic policy direction.

The benchmark Philippine Stock Exchange index (PSEi) on Tuesday plunged by another 115.12 points or 1.59% to settle at its intraday low of 7,123.33. The broader all shares likewise tumbled 60.22 points or 1.38% to 4,304.65.

“There was risk- off sentiment ahead of [UK Prime Minister] Theresa May’s speech and Trump’s inauguration,” Victor F. Felix, equity analyst at AB Capital Securities, Inc., said in a telephone interview.

Ms. May was scheduled on late Tuesday (1145 GMT) to deliver a speech outlining plans to proceed with Britain’s withdrawal from the EU single market, following the outcome of a referendum dubbed as the “Brexit” vote in June 2016.

“‘Brexit’ hasn’t happened yet. This will happen when the UK triggers Article 50, which will unlikely take place until around March. In the bigger picture, this presents a political risk in the euro zone area,” Mr. Felix said.

Mr. Trump, meanwhile, will take over the White House on Jan. 20. Markets are keeping a close watch on the leadership change for possible clues on the direction of the world’s largest economy.

“If there is increased spending in the US, most investors might decide to keep their money there to ride the boom cycle and there might be more outflows from the Philippines,” Mr. Felix noted.

“But again, we always fall back on fundamentals. We are one of the fastest growing economies in Asia, if not the fastest,” the analyst added, while acknowledging that Mr. Trump’s protectionist stance poses a risk to the Philippines.

Frank Gerard A. Barboza, equity trader at AP Securities, Inc., similarly attributed the selldown to concerns over the possible impact of Britain’s departure from the EU along with uncertainties over the leadership change in the US.

“Also, some liquidation for the coming BDO Unibank, Inc.’s stock rights offering could have added some selling pressure,” Mr. Barboza noted.

Accordingly, value turnover at the exchange stayed below average at P5.51 billion after 2.20 billion shares changed hands. Foreign investors further trimmed their holdings, posting nearly P311.99 million in net sales. Decliners trumped advancers, 130 to 67, while 41 issues were unchanged.

All counters shed more than 1% during the session. The property sector suffered the most, dropping 79.74 points or 2.42% to close at 3,213.59.

Services fell by 26.34 points or 1.90% to 1,355.15; financials by 23.54 points or 1.35% to 1,713.52; mining and oil by 164.14 points or 1.34% to 12,045.88; industrial by 124.13 points or 1.11% to 11,004.25; and holding firms by 74.69 points or 1.01% to 7,307.96.