Philippine stocks buck Asia rally on regulatory risks

MANILA: The Philippine benchmark stock index fell on the first trading day of 2020, bucking a rally in Asia after President Rodrigo Duterte threatened to jail owners of Manila’s water utilities for contracts he said are disadvantageous.

The Philippine Stock Exchange Index fell 0.9% to 7,742.53 at the 33.0pm close, following a three-day holiday. The index sank as much as 2.2% earlier Thursday as a selloff in water-related stocks such as Ayala Corp and Metro Pacific Investments Corp spread over to other stocks.

“The fallout, should the worst happen, could create a spiral, both in sentiments and the real economy, that may be difficult to overcome,” Justino Calaycay, analyst at Philstocks Financial said in a note.

“A semblance of buying entered in afternoon trades but this wasn’t enough to overturn the day’s negative momentum.”

Duterte on Dec 30 said swindling charges are probably appropriate against owners of the two water providers in the capital. Metro Pacific, owner of Maynilad Water Services Inc, fell 3.5%. Ayala Corp fell 2%, while its unit Manila Water Co dropped 6.4%.

“There is a concern that it will be a precedent for other businesses, especially those which are heavily regulated,” Rachelle Cruz, analyst at AP Securities Inc, said.

First Gen Corp, a power producer, sank 4.8%, its sharpest loss in nearly eight months. JG Summit Holdings Inc, which has investments in airlines and petrochemicals, sell 3.5%.

Seventeen of the benchmark index’s 30 components declined with financial and industrial companies providing the biggest drag. BDO Unibank Inc, the nation’s biggest lender, was down 2.5%.

“Investors are taking conservative positions more than usual,” said Paola Beatrice Lopez, an analyst at Regina Capital Development Corp in Manila.

Overseas investors pulled out US$173 million in December when Duterte said he wants new contracts signed with the water concessionaires.