Shares plunge as China hikes tariffs on US goods

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PSE BGC bells

By Arra B. Francia, Senior Reporter

SHARES PLUNGED on Tuesday after China’s tariff hike retaliation against the United States, alongside impacts of the MSCI rebalancing.

The bellwether Philippine Stock Exchange index (PSEi) fell 1.23% or 95.54 points to close at 7,646.66 yesterday. The broader all-shares index likewise slumped 1.14% or 54.72 points to 4,736.54.

“This selloff was triggered by China’s retaliation to the tariff hike that was imposed by the US last week,” Timson Securities, Inc. Equity Trader Jervin S. de Celis said in a mobile phone message.

China said it will raise tariffs up to 25% on $60 billion worth of US goods starting June 1, after Chinese Foreign Ministry Spokesman Geng Shuang was quoted as saying that China will “never surrender to external pressure.”

The tariff hike came less than a week after US President Donald J. Trump more than doubled tariffs to 25% on $200 billion worth of Chinese goods as he cited the slow negotiations with Beijing.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan also attributed the market’s volatility to latest developments in the US-China trade war.

“With the midterm elections now out of the way, most fund managers looked overseas, where most of the major market making activity was happening,” Mr. Limlingan said in a mobile phone message.

“Coinciding with this (China’s retaliation) is the MSCI quarterly review announcement which will take effect on June 3,” Timson Securities’ Mr. De Celis added.

MSCI trimmed the index weight of some local firms, including SM Prime Holdings, Inc. (0.17%), Ayala Land, Inc. (0.15%), BDO Unibank, Inc. (0.12%), SM Investments Corp. (0.10%), and JG Summit Holdings, Inc. (0.08%).

On the other hand, MSCI increased the weight of Ayala Corp. by 0.82% and International Container Terminal Services, Inc. by 0.36%.

“Given the negative development in the Sino-US trade war, the changes in weight of these stocks exacerbated the movement especially during the morning session,” Mr. De Celis said.

Four sectoral indices moved to negative territory, led by financials which plummeted 3.04% or 52.95 points to 1,685.88. Holding firms went down by 2.3% or 169.53 points to 7,176.38; industrials dropped 0.71% or 82.49 points to 11,445.83, while services slipped 0.02% or 0.4 point to 1,595.17. In contrast, mining and oil jumped 1.18% or 86.81 points to 7,412.09, and property rose 0.94% or 38.81 points to 4,156.81.

Turnover improved to P11.95 billion after some 919.79 million issues switched hands, higher than Friday’s P7.55 billion.

Net foreign outflows doubled to P1.46 billion, compared to the previous session’s P688.25 million.

Decliners were more than double the advancers, 140 to 57, while 37 names were unchanged.