PSEi drops 3.9%, nears bear market territory amid virus fears

Philippine equities experienced their sharpest decline in four years, with some analysts anticipating a looming bear market due to escalating fears surrounding the global spread of the coronavirus.

The Philippine Stock Exchange index dropped 3.9% to 6,909.84 on Wednesday, extending a three-day slump to 6.8%, and is now close to a 20% decline from its 2019 peak.

Strategist Manny Cruz of Papa Securities Corp. believes the index could test the 6,692.23 level, indicating a bear market, as global economic concerns overshadow expectations for robust growth in the Philippines.

Even with a low number of reported COVID-19 cases, the Philippines' benchmark gauge has suffered a year-to-date loss of nearly 12%, making it one of the world's worst performers alongside Lebanon and Thailand.

Prior to the virus outbreak, the outlook for the Philippine stock market was optimistic, with major financial institutions predicting double-digit gains for the equity index in 2020.

The coronavirus outbreak has significantly impacted supply chains and consumer behavior, leading to revised expectations of a potential 10% profit growth for Philippine companies being overly optimistic.

Cruz anticipates that rallies will be temporary as global risk aversion is likely to intensify with rising infection rates, potentially leading to discussions and fears of a global recession.

The economic impact is expected to transcend the tourism and consumer sectors, potentially creating a domino effect on other industries due to a slowdown in manufacturing.

Cruz suggests favoring stocks less likely to be severely affected, such as those in the banking and property development sectors, including Bank of the Philippine Islands, Security Bank Corp., Metropolitan Bank & Trust Co., and Ayala Land, Inc.