(STAR) By Zinnia dela Peña and Des Ferriols - Stocks reeled from another selloff yesterday with the main composite index losing 12.1 percent of its value week-on-week as investors scrambled to exit the market, fearing a snowballing global credit crisis.

The Philippine Stock Exchange index (PSEi) closed 57.97 points, or two percent lower at 2,884.34, its lowest finish since Dec. 27 last year when it settled at 2,883.47, wiping out all gains so far this year. The index has dropped a total of 500.86 points in the past five days. The all share index dropped 36.64 points or 1.9 percent to 1,865.22 with a total of 109 decliners and 21 gainers while 25 stocks were unchanged.

“Foreign investors are massively selling shares fearing further heavy losses. The situation is very serious with no end in sight to the problem,” an analyst said.

Amid the continued selloff, the peso lost more ground, hitting its lowest level in three months against the dollar as global investors fled emerging markets like the Philippines due to lingering concerns about the US housing and credit markets.

At the Philippine Dealing System (PDS), the peso quickly tumbled to a low of 46.900 after opening at 46.700, prompting the Bangko Sentral ng Pilipinas (BSP) to add more than usual liquidity.

The peso was one of the hardest hit currencies, aggressively tracking the losses posted by other Asian currencies led by the Malaysian ringgit and the Korean won.

“People are still taking a defensive position and given that, I think there’s a room for a further slide to the 47(to the dollar) levels,” Jonathan Ravelas, a market strategist at Banco de Oro-EPCI Inc. said.

Local financial markets will be closed on Monday for a public holiday.

“Until global markets stabilized, investors will remain bearish and will continue to ignore the good economic news here,” said Astro del Castillo of First Grade Holdings.

The market rose in early session but later surrendered modest gains as investors fret about tightening credit and the fallout from the crisis in US sub-prime mortgages, outweighing news that the Philippine government posted a budget surplus for July.

Finance Secretary Margarito Teves announced yesterday morning that the government had a budget surplus of P1.6 billion in July due to additional revenue from the sale of its shares in geothermal power producer PNOC Energy Development Corp.

After failing to meet tax collection targets in the first half, the government is relying on asset sales to meet this year’s budget deficit target of P63 billion.

Global stocks have been falling since August 9 when worries about U.S. subprime loans and their broader financial impact overwhelmed markets in Asia, Europe and the US.

Philippine Long Distance Telephone Co. and its rival Globe Telecom cushioned the market’s fall, rising by 1.1 percent to P2,295 after hitting an intraday high of P2,350, and 1.7 percent to P1,230 .

PLDT chairman Manuel Pangilinan bought on Thursday an additional 1,000 common shares of PLDT at P2,400 per share to take advantage of the stock’s low price.

Conglomerate Ayala Corp. fell P15 or 3.6 percent to P402.50 while unit Ayala Land Inc. fell 50 centavos or 3.6 percent to P13.25.

Food and beverage giant San Miguel Corp. A-shares retreated P3 or 4.8 percent to P59, while its B-shares slid P5 or 7.7 percent to P60.

BSP expresses optimism

The BSP said the Philippine market had more room to swing itself back into position since, unlike other markets in the region, it had the opposite situation of having excess liquidity prior to the outbreak of the US subprime crisis.

BSP Governor Amando M. Tetangco Jr said admitted liquidity was not a problem in the Philippine market but declined to indicate if the BSP would be considering the possibility of halting the mopping up operations it started in May.

Analysts said that if only the market would get a grip of itself and start differentiating between markets to reward emerging economies with strong fundamentals, the US subprime outbreak would have been good for the BSP in terms of tempering forex inflows. The panic, however, has left markets like the Philippines in the general clump of what fund managers would automatically consider risky assets, regardless of economic fundamentals.

Analysts said it did not help either that the market was largely unimpressed by the P1.6-billion surplus reported by the Arroyo administration in July, noting that the surplus was due to a non-recurring income and tax collection targets were broadly missed by revenue agencies.

Credit rating agencies have commended the government of its fiscal consolidation but maintained warnings that revenue efforts have not been able to deliver the actual revenues expected from the increase in the value-added tax rate.

“This means that when investors start to differentiate between the markets, they might not actually like what they will see in our fiscal front and dump us anyway,” said one trader.

Still, BSP officials said the fall-out from the problems in the US credit market was likely to have only an indirect impact since Philippine banks were not exposed in any significant way.

“Any impact on the Philippines will be largely indirect, mainly in the form of risk aversion,” Tetangco said.

Moreover, Tetangco said the market had sufficient domestic liquidity and this would limit the effects of the global sell off spurred by jitters over the US sub-prime market.

“More fundamentally, the increased availability of longer term funding in pesos has also reduced the country’s vulnerability to adverse external market developments,” Tetangco said.

Chief News Editor: Sol Jose Vanzi

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