Index declines on outflows due to China RRR cut

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PHILIPPINE STOCKS tanked on the first day of trading for 2020 as money flew to China following its central bank’s decision to reduce banks’ reserve requirement ratio (RRR) and as uncertainty continues to hover on water stocks and ABS-CBN Corp. due to a rift with the government.

The benchmark Philippine Stock Exchange index gave up 72.73 points or 0.93% to close at 7,742.53 on Thursday, while the broader all shares index lost 30.92 points or 0.66% to 4,618.75.

“Investors flocked to China as the PBoC (People’s Bank of China) reduced the required reserve ratio by 50 basis points, effective Jan. 6, releasing more than 800 billion yuan of long-term liquidity to the banking sector,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message Thursday.

“Technically, the RRR cut will help smooth liquidity conditions with the upcoming tax payment season in the second half of January and the Spring Festival period… Given the sudden announcement, both Chinese and Hong Kong markets traded higher, while regional counterparts including the Philippines ended the first day of the year lower,” he added.

China’s Shanghai SE Composite index closed Thursday’s trading session up 1.15% while Hong Kong’s Hang Seng index jumped 1.25%. This drained money out of other Asian markets, where Japan’s Nikkei 225 and Topix indices shed 0.76% and 0.68%, respectively, and South Korea’s Kospi index removed 1.02%.

For Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco, the decline of the local market was due to renewed concerns over water concessionaires following the latest tirades from President Rodrigo R. Duterte.

“The latest remarks from the government against Manila Water (Co., Inc.) and Maynilad (Water Services, Inc.), and even on ABS-CBN raised regulatory risks again causing investors to sell their positions,” he said in a text message.

Shares in Manila Water fell 6.37% on Thursday, while shares in Maynilad investor Metro Pacific Investments Corp. went down 3.45%. ABS-CBN, for its part, lost 0.63% yesterday.

Sectoral indices also recorded losses on Thursday. Financials lost 31.64 points or 1.69% to 1,832.01; industrials gave up 147.60 points or 1.53% to 9,487.47; mining and oil declined 82.02 points or 1.01% to 8,009.96; holding firms dropped 74.54 points or 0.98% to 7,517.53; and property went down 9.40 points or 0.23% to 4,145.12.

The sole gaining sub-sector was services, climbing 3.20 points or 0.20% to 1,534.30.

Thursday ended with some 945.64 million issues worth P4.48 billion changing hands from last Friday’s 565.493 million issues worth P6.60 billion.

Decliners outpaced advancers, 111 against 60, while 66 names were unchanged.

Net foreign selling grew slightly to P852.24 million on the first trading day of 2020 from P817 million last Friday. — Denise A. Valdez