September 12, 2001

Financial Shock

When we noted that the local bourse will track the developments in the US, the day's terrorist attacks are not quite what we had in mind. Nonetheless, Philippine investors fell prey to "worry selling" (as against full blown panic selling) causing the PHISIX dropping 52.7 points to its three-year low. Nearly every issue traded posted losses, with only nine managing to trade up.

Turnover swelled, but not exactly to the billions that we feared. It reached P624mn, as against the below P400mn average that we have been experiencing. Perhaps it helped that portfolio investors had been selling off their Philippine equities for months. Otherwise, today's dip could have been more dramatic.

Elsewhere in the world, bourses that opened likewise experienced a selling frenzy. Investors' worries range from worldwide recession to a new world war. After all, the US is expected to retaliate, with US President Bush saying that they will make no distinction between terrorists and those who harbor the same.

In any case, for investors hunting for bargains in the market, take note of the following major blue chips that posted significant declines for the day: SLC (-12% to P990), SMPH (-9.09% to P6), TEL (-8.72% to P497.5), FDC (-6.98% to P0.8), DGTL (-6.25% to P0.45), MPC (-6.06% to P0.31), PCOR (-5.81% to P1.62), MERB (-5.49% to P43) and BPC (-5.41% to P43).

SLC, which at the height of the speculation against the peso months ago became the safe haven for investors' funds, today took on a new role as the stock to avoid. The same of course would hold true for MFC (-12.59% to P1250). Both insurance firms have assets primarily in the US and Canada. With thousands of people feared dead from the attacks, expect claims to pile up against insurance firms. Consequently, expect profits and share prices to tumble.

At this point, it may be too early to speculate on what will transpire in the coming months. For sure however, bourses worldwide must contend with uncertainties, not just in economic terms, but in peace and order issues as well. As is, the US and the rest of the world already speculate that Middle East terrorist forces are behind the attack. Should there be a standoff, we may see world crude oil prices spike back to or even exceed the Gulf War levels.

Reviewing today's performance, we believe the 50-point drop is a knee jerk reaction; an act of shock. In assessing potential repercussions in the world climate, we surmise that 50 points is probably not enough.