PSEi Suffers Biggest 1-Day Percentage Decline Since 2008; More to Come
The Philippine Stock Exchange Index or the PSEi suffered its biggest one-day percentage decline of 9.71% since October 2008. The index cratered to a low of 5,736 from 6,770 as the World Health Organization (WHO) declared the COVID-19 as pandemic. The index’s performance or lack of came after a 5.86% slide in the Dow Jones Industrial Average. It likewise reflected another 5% slide in the US futures market. With the said decline, the PSEi triggered a mechanical circuit breaker that suspended trading for 15 minutes. A similar circuit breaker was also tripped in Thailand while other markets suffered a less pronounced but nonetheless sharp decline as the whole world entered into the bear market territory.
From a technical perspective, one can see that the index has already pivoted off a multi-year bearish reversal formation. While its recent slip may seem to be already ‘steep’, it is actually just at the early stages of a fresh bear wave. How low can it go? Well, if the ongoing pandemic translates to a full blown financial crisis, then it appears that the market still has a lot of room to fall. Interim rallies, of course, are to be expected but since the index is now in a downtrend, we can expect that any rally may just be temporary sans a presence of a basing formation. So to answer the question, well, the index can fall to as low as ~3,800 to ~4,500. It may be inconceivable at this point but if you go back to the 1997 and 2008 crises, both declines retraced 70-80% of the prior bull runs. Some may already be shouting “buy when there’s blood in the street!” This is not blood, not yet. 30% off the peak is not a crisis level. 62-70% is!
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*Consensus target price or average target price given by the major foreign and local brokers of various stocks on top of index names are available in our Equity Advisor!
