Falling Industrial Profits in China Drag PH Stocks

Philippine stocks plunged on the first session of the week as regional weakness wrought by the latest economic data out of the region’s largest economy dragged the local equity market to its fifth consecutive decline.

Yesterday, the Philippine Stock Exchange Index (PSEi) sank and lost 101.96 points, or -1.47 percent, to 6,815.59, while the broader All Shares Index (PSE:ALL) trailed by -0.96 percent, giving up 38.63 points, to 3,952.45.

Equity markets in Japan, Indonesia, Singapore, and Malaysia retreated following the release of China’s industrial profit data, which fell by 8.8 percent in August compared to a year ago, after falling 2.9 percent in July, according to the National Bureau of Statistics (NBS).

Rising cost and weaker demand, coupled with a devalued Yuan hurt profits of industrial companies, further bolstering the slowdown in the world’s number two economy. Volatility in the Chinese stock market also dented profits, as investment returns were cut.

For the first eight months of the year, profits from China’s industrial companies fell by -1.9 percent during the comparable period in 2014, with the mining industry mainly to blame for the decline. NBS data showed profits from the mining industry fell by 57.3 percent from January to August, with state-run firms as worst performers compared to their private counterparts.

A week ago, flash PMI estimate for September also fell further compared to their August and July reading, which together with the latest economic data, speak negatively of the prospects of the Chinese economy, according to analysts.

With China being the country’s top trading partner, industrial stocks fell the most among the sub sectors. Industrial stocks dropped -1.7 percent, followed by a -1.27 drop from holding firms, and -1.22 percent decline from financials.

Services and property stocks fell by -1.19 percent and -0.99 percent, respectively, while the mining and oil sector declined by -0.41 percent.

One hundred and sixteen stocks closed on the red, while 60 managed to end on the green, with 43 issues were unchanged. Turnover fell to only Php 5.7 billion, while foreign investors were net sellers by Php 595 million.

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