PSEi retreats to weakest in nearly 2 months ahead of SONA
MANILA, Philippines — Local equities on Monday opened the week on a sour note, sinking back to the 5,000-level as investors traded cautiously ahead of President Rodrigo Duterte’s much-awaited fifth State of the Nation Address (SONA).
Pending clarity on Duterte’s plans going into his fifth year in office, investors dumped local shares to bring the Philippine Stock Exchange index (PSEi) down 2.37% to 5,860.94. It was the benchmark’s weakest close since May 29’s 5,838.84.
The broader all-shares index shed 1.85%.
“PSEi shares ended lower to start the week, as investor stayed on the sidelines ahead of the SONA...,” Luis Limlingan of Manila-based brokerage firm Regina Capital said in a market commentary.
Businesses await the unveiling of the government’s long-delayed pandemic recovery program, which Duterte is scheduled to release through his SONA before lawmakers at 4 p.m. In particular, Francis Lim, president of Management Association of the Philippines, said investors are hoping the President would push for more fiscal stimulus, viewed key, but currently lacking, in resuscitating the economy.
Leaders in Congress, which also opens a new session on Monday, had said legislators will prioritize the passage of the Bayanihan to Recover as One bill, one of the administration’s preferred modes of stimulus. The measure extends Duterte’s power to move funds within the budget without Congress approval, but does little to increase the present budget for pandemic response.
“We cannot afford to be behind the curve in putting in place all necessary stimulants to help our economy recover quickly from the pandemic,” Lim said in a text message.
“We are also hoping to hear measures to ensure and strengthen the rule of law whose role in our economic recovery cannot be underestimated,” he added.
Lockdowns are bad news
Foreign investors sold P1.02 billion more equities than they bought on Monday, signaling that even outsiders are awaiting Duterte to speak before making positions. Decliners outnumbered advancers, 123 to 72 , while 48 names were unchanged.
All sub-indices at the stock market closed in the red, save from mining and oil which rallied 4.2% from Friday after the government reportedly plans to open 26 mining sites closed in 2017. Duterte has been an anti-mining advocate, and used one of his SONAs to castigate mining firms over environmental consequences of their business.
At this year’s SONA though, all eyes and ears are on the government’s next steps to contain and finally put the coronavirus disease-2019 (COVID-19) pandemic under control. For April Lee Tan, research head at COL Financial, said a preference to stricter lockdowns will not bode well for the market.
“Maybe it's the rising COVID-19 cases and the possibility of returning to (modified enhanced community quarantine) if numbers exceed 85,000,” Tan said in a text message.
For Calixto Chikiamco, president of Foundation for Economic Freedom, a group of former finance secretaries, the Duterte administration has so far been “using only fear and fiscal conservatism.”
“He has also divided the nation politically when the country needs to be united in dealing with the pandemic and the sharp economic downturn... What I want to see is for him to end the use of fear in managing the pandemic and unify the country,” Chikiamco said in a Viber message.
“He still has two years to make course corrections so not yet a failure yet for his entire term,” he added.
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