Stocks continue to drop on fears of Milenyo’s impact

Stocks fell yesterday on concern property losses and lost wages due to typhoon Milenyo may damp consumer spending, hurting earnings of companies.

Typhoon Milenyo, the strongest to hit Manila since 1995, smashed into the Philippine capital on Sept. 28, knocking down power and communication lines in the city and other parts of Luzon island. Work was curtailed for two days and power has not been fully restored.

"Property losses will force people to cut back on spending," said Paul Joseph Garcia, who helps manage about $1.2 billion at ING Investment Management. "The brown outs forced companies to shutdown temporarily and this affects daily wage earners."

The Philippine Stock Exchange Index lost 20.19, or 0.8 percent, to 2,522.50 at the noon close. Losers beat gainers 62 to 30. The market dropped 0.6 percent Monday. The index hasn’t dropped for two or more consecutive days since a five-session slide ending Aug. 25.

Stocks may extend declines, Garcia said.

"The adverse impact on the economy and earnings of the companies hasn’t been fully factored in by the market," he said.

Philippine Long Distance Telephone Co. (PLDT), the nation’s biggest company, dropped P35, or 1.6 percent, to P2,215. Ayala Corp., owner of the country’s largest builder, dropped P5, or 1.1 percent, to P460.

Metropolitan Bank & Trust Co., fell 50 centavos, or 1.2 percent, to P41.

"The weakening of US economy is also aggravating the situation," Garcia said. "This is bad for global equities and has a negative impact on local stocks."

Manufacturing in the US expanded less than forecast last month, while spending on home construction fell for a fifth straight month. US-based Filipinos account for over half of remittances paid back to the Philippines.

"The US is our biggest trading partner," said Astro del Castillo, managing director of First Grade Holding Inc., a financial management and advisory company in Manila. "Any sign that its economic expansion may be weakening could affect us."

Slowing growth in exports may make it harder for the Philippine government to meet its goal of boosting economic expansion to at least 5.5 percent this year.

"We were expecting a rebound given the peso’s rice past the 50 to the dollar mark but that obviously was not enough to inspire investors to go back into the market," said Rommel Macapagal of Westlink Global Equities.

"Investors are looking for excuses to unload and then buy on dips. I think overall sentiment though remains positive given improving economic fundamentals," said Lawrence de Leon of Accord Capital Equities. – AFP