PSEi drops 4% in the final minutes of Friday’s trading day

The PSEi finished closed Friday at 5,862 after a shocking last-minute 4% drop, pushing the PSE’s benchmark stock index back to levels that we haven’t seen since September 2022. Looking back in retrospection, analysts provided several reasons for the drop, including the US Federal Reserve’s “cautious” stance on inflation (link), rebalancing of the PSEi and its sister indices (link), and the Philippines’ disappointing FY24 and Q4 GDP figures (link). Nearly P22 billion in stock changed hands, with P594 million in net foreign buying. On a sectoral basis, Mining and Oil was the hardest hit (down 6.6%), followed by Industrial (down 5.4%), and Property (down 3.7%). The only sector to gain was Financial, which increased 1.0%. The action was even more intense at the individual stock level. The only two notable gainers were the two PSEi inclusions, Chinabank [CBC 93.00 ?38.9%; 1117% avgVol] and AREIT [AREIT 42.00 ?7.7%; 944% avgVol]. The rest of the Advances table were illiquid playthings. On the Declines side, Alliance Global [AGI 6.00 ?20.0%; 710% avgVol] and San Miguel [SMC 65.20 ?20.0%; 792% avgVol] dropped 20%, which wiped away approximately P13 billion and P39 billion in marketcap respectively. Unfortunately, the rout wasn’t restricted to just those two stocks, as Nikel Asia [NIKL 2.17 ?17.8%; 1230% avgVol], Bloomberry [BLOOM 3.43 ?13.6%; 170% avgVol], Emperador [EMI 16.04 ?11.2%; 579% avgVol], and Century Pacific [CNPF 36.65 ?10.3%; 345% avgVol] all plummeted on big volume.

MB BOTTOM-LINE:  I’m up to my eyeballs in chats with fellow investors, analysts, and business owners, and while I have heard a consistent drumbeat of nervous and pessimistic FY25 sentiment, I didn’t come across anybody--except for economist Jonathan Ravelas--looking for that kind of drop on Friday. As per his explanation, “How can the market recover when consumers still feel the high prices. 70% of our economy is about consumption. Infra spending and election spending are your positives, and negatives like Trump tariffs, currency volatility and WPS issue. Will you be bullish?” I think this vocalizes the uncertainty that I’ve been trying to communicate for FY25. It’s not that I don’t see paths to growth, it’s that I see so much material uncertainty behind nearly all of the macro inputs. I’m not skilled enough to know how a trade war between the US and China, the US and Canada, and the US and Mexico will impact global trade. I don’t know how that will impact shipping and fuel prices. I don’t know what secondary effects will boil up, what new dynamics will emerge, and how those will impact things like inflation, interest rates, the US Dollar, and oil. I'm expecting the PSEi to bounce back today, but I'm going to be watching very closely to see how enthusiastic (or not) that rebound is, and where the buying enthusiasm is concentrated!