Stocks tumbled Wednesday on worries that hardline Republicans could vote down a crucial bill to hike the US borrowing limit and risk a catastrophic default that could hammer an already fragile global economy.
The PSE index, the 30-company bellwether of the Philippine Stock Exchange, dropped 33 points, or 0.51 percent, to close at 6,477.36 as four of the six subsectors declined, with only financials and mining and oil ending in the green.
The broader index representing all shares also lost 16 points, or 0.48 percent, to settle at 3,458.30 on a value turnover of P24.54 billion. Losers outnumbered gainers, 94 to 83, while 49 issues were unchanged.
Only three of the 10 most active stocks ended in the green, led by SM Investments Corp. which rose 2.03 percent to P929.00. BDO Unibank Inc. gained 1.27 percent to P136.00, while Ayala Land Inc. inched up 0.19 percent to P26.30.
Other conglomerates were heavy losers Wednesday.
Meanwhile, the peso slightly rebounded to finish at 56.15 against the US dollar from 56.31 Tuesday.
Most Asian markets traded lower. Further signs that China’s post-pandemic recovery was fading added to the downbeat mood on trading floors, as did worries that the US Federal Reserve is likely to increase interest rates again next month.
The buoyant mood that started the week, after US President Joe Biden and House Speaker Kevin McCarthy finalized a debt deal, was giving way to a fear that the far-right Freedom Caucus could torpedo it.
Members on both sides of the political spectrum have raised concerns about the agreement, with Republicans saying it does not have enough spending cuts and the left wing of the Democratic Party unhappy that Biden agreed to any limits at all.
The Treasury has warned that if the borrowing ceiling is not lifted by June 5, the government will run out of cash to service its debt obligations.
While McCarthy has described the deal as “transformational” and expressed confidence the bill will pass, leading Freedom Caucus member Chip Roy called it a “turd sandwich”.
“Not one Republican should vote for this deal. It is a bad deal. No one sent us here to borrow an additional $4 trillion to get absolutely nothing in return,” Roy said at a Freedom Caucus news conference.
He later warned McCarthy would face a “reckoning”. That came as another GOP Representative, Dan Bishop, called party members to vote McCarthy out as speaker.
And CMC Markets analyst Michael Hewson said ratings agencies were “already sharpening their pencils on downgrades for the US credit rating”.
Still, House Democratic leader Hakeem Jeffries remained confident, telling Bloomberg Television: “We will be able to get this bill over the finish line tomorrow.”
But with the House vote due later Wednesday, nervous investors were shifting out of risk assets, sending Asian markets well into the red.
Hong Kong led losses, dropping nearly two percent, while Shanghai was also well down.
There were also big losses in Tokyo, Sydney, Seoul, Mumbai, Bangkok, Singapore, Taipei, Wellington and Jakarta.
Sentiment was given an extra jolt after data showed China’s manufacturing activity contracted even further last month as leaders struggled to kickstart the world’s number-two economy.
The country’s growth has stalled this year, despite expectations for a surge after strict Covid rules were lifted at the end of last year.
“China’s uneven economic recovery is one of investors’ concerns, along with geopolitics,” said Vey-Sern Ling, at Union Bancaire Privee. With AFP