PSE Index falls back to 6,500– analysts explain what happened

The Philippine stock market was trading lower for most of Tuesday’s session, with the benchmark index (PSEi) dropping as low as 6,462.72—a daily decline of about 2.3 percent.

It pared losses to finish at 6,501.71, down 1.72 percent from the previous day.

We asked experts to explain the market’s movements and what drove today’s decline.

Foreign selling pressure

“The PSEi closed lower on Tuesday due to sustained net foreign selling, as the market anticipates a slower pace of interest rate reductions in the US, which could further weaken the peso,” Wendy B. Estacio-Cruz, Unicapital Securities head of research, said in a text message on Tuesday.

“The US Federal Reserve and the [Bangko Sentral ng Pilipinas] will announce their interest rate decisions on Dec. 18 and 19, respectively,” she added.

Wendy B. Estacio-Cruz

Unicapital Securities head of research

Data from the stock exchange showed P1.36 billion in net foreign selling during the session.

“The PSEi fell amidst strong selling pressure as foreigners net sold nearly P1.4 billion worth of shares and investors hedged their risk ahead of the monetary policy meetings of the Federal Reserve and Bangko Sentral ng Pilipinas this week,” Juan Paolo Colet, managing director of China Bank Capital, said in a text message on Tuesday. 

“In view of the failure of 6,550 to hold, the next support level is now around 6,400,” he added.

Juan Paolo Colet 

China Bank Capital managing director 

Large-caps pull back

International Container Terminal Services was the top traded stock as it slipped 3.65 percent to P385.40 per share.

It was followed by Ayala Land Inc. (-2.1 percent to P25.70), Bank of the Philippine Islands (-4.67 percent to P128.50), BDO Unibank Inc. (-0.47 percent to P149), and SM Prime Holdings (-1.15 percent to P25.90).

PSEi undervalued vs peers

“Currently, the Philippines remains one of the most undervalued indices, trading at 11x P/E, a 47 percent discount to its 10-year average,” Estacio-Cruz said.

When stocks are said to be undervalued, it presents opportunities for investors to acquire assets at lower prices.

“We expect the index to dip further should the US Fed decide not to cut policy rates at the next FOMC meeting. We see the index ranging from 6,400-6,600,” Estacio-Cruz added.