For newbie Filipino investors who lack years of experience trading Philippine stocks, a huge drop in the level of the Philippine Stock Exchange index (PSEi) is certainly terrifying.
Imagine the index dropping by 12% in just a single day! This means if you invested P100,000 in stocks, your portfolio lost a huge P12,000 — in just one day! — making your money worth just P88,000.
Guess what, that’s actually what happened back in October 27, 2008 when the PSEi registered an unprecedented 12.27% decline — its biggest 1-day drop in recent history.
Price drops in the stock market are not entirely new, but price losses of this magnitude is no doubt scary for investors who have not yet experienced the complete cycle of boom and bust in the PSE.
Let’s revisit the days when the Philippine stock market recorded huge one-day price losses.
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Biggest 1-Day Losses in the PSE
PSE Loss of -3.86% on February 26, 2020
After hovering above the 7,000 level for several months, the PSEi finally broke the 7,000 support level and closed at 6,909.94 — down 3.86%, the biggest one-day loss since 2016.
Philippine stocks trailed global markets, especially US stock markets, which have been taking a beating due to escalating concerns that the Wuhan coronavirus (COVID-2019) could worsen and become a global pandemic, consequently impacting the global economy.
At risk are companies spanning various industries. For one, profitability of tourism and airline companies are expected to suffer, brought about by cancellations of flights and vacation plans by tourists. Consumer companies are also feeling the brunt as customers prefer to just stay at home, instead of shopping or dining out. Meanwhile, companies reliant on Chinese manufacturers are experiencing supply chain disruptions which could lead to production delays.
The World Health Organization (WHO) reported that the epidemic has peaked in China but unfortunately is spreading faster than expected in other countries, including South Korea, Japan, and the United States. As of February 2020, the WHO has tallied more than 83,000 confirmed coronavirus cases, with at least 2,800 deaths due to COVID 2019 worldwide.
PSE Loss of -2.58% on February 28, 2020
Philippine stocks continued their downtrend in the aftermath of the coronavirus global scare. On February 28, 2020, the PSEi dropped by another 2.58% closing at 6,787.91 points.
Year-to-date, that is, from January 2020 to February 2020, Philippine stocks are already down 13.15%.
PSE Loss of -4.37% on January 11, 2016
External negative developments caused a 4.37% one-day decline in Philippine stocks, with the PSEi closing at 6,288.26 points.
Analysts point to growing concerns that China’s boom has peaked as seen in the country’s declining GDP growth rates. China’s weak economy is also seen to affect the demand for oil, subsequently causing a decline in prices with fears that the oil price downtrend could continue unabated in the coming months.
PSE Loss of -12.27% on October 27, 2008
Philippine stocks recorded what could be the biggest one-day price drop in recent history on October 27, 2008 — falling by a whopping 12.27% in the aftermath of the bankruptcy filing of investment bank Lehman Brothers (see also: Why AIG was bailed out but not Lehman Brothers).
The steep drop was also caused by negative overall market sentiment and global sell-offs since the United States was also in the middle of its subprime mortgage crisis during this time. On this day, the PSEi closed at a low of 1,713.83 points.
PSE Loss of -2.14% on March 20, 2018
The PSEi again dropped massively, shedding 175.94 points to end at an index level of 8,059.60. This represented a 2.14% price decline from the previous trading day.
Philippine stocks tracked U.S. equity markets which also suffered from a slump the night before, with the Dow Jones closing at 24,610.91 points, down 1.35%, and the NASDAQ closing at 7,344.242 points, down 1.84%. U.S. stocks declined following reports that U.S. President Donald Trump is planning to impose tariffs on imports from China and restrictions on Chinese investments in the U.S.
PSE Loss of -2.42% on January 31, 2018
The PSEi fell more than 200 points and recorded a huge intraday loss of 2.42%. This after several days of price surges with the PSEi settling above 9,000 points. Stock prices, however, recovered before the day’s close, but the index still ended today with a price loss of -1.64% compared to the previous day’s ending level of 9,058.62.
PSE Loss of -6.70% on August 24, 2015
The index settled at 6,791.01 points, a sharp one-day fall of 6.7%. More than 212 stocks declined in value versus only 13 that managed to record a price increase.
The primary culprit is said to be concerns about China, especially its declining growth rate. Weak manufacturing output signaled that China’s GDP growth is falling faster than expectations.
At the same time, sell-offs in China’s stock markets fueled concerns about market volatility. The Shanghai stock market, for instance, has fallen since its peak in June 2015 — with 30% of the value being wiped out in just 3 months.
PSE Loss of of -5.96% on August 22, 2013
Philippine stocks declined by a huge 5.96% after a report of the Federal Open Market Committee (FOMC) of the US Federal Reserve was released showing that majority of the Fed members support the termination of the Quantitative Easing (QE3) program. (Read: What is Quantitative Easing or QE3?)
PSE Loss of -6.75% on June 13, 2013
Huge outflow in foreign funds contributed to a sharp 6.75% one-day decline of the PSE on June 13, 2013. On this day, the PSEi closed at 6,114.08.
Foreign investment funds were being siphoned away from emerging markets, such as the Philippines, back to developed economies after the US Federal Reserve announced it will soon end the Quantitative Easing (QE3) liquidity infusion program. (Read: What is Quantitative Easing or QE3?)
PSE Loss of -5.13% on September 23, 2011
Philippine stocks dropped a huge 5.13% on September 23, 2011 due to lingering concerns on a possible global recession, highlighted by fears that some countries in Europe are bailing out and could default on their sovereign loans. The PSEi, on this day, closed the days trading at 3,885.96 points.
PSE Loss of -4.02% on August 9, 2011
Standard & Poor’s downgraded the United States’ credit rating, sparking a 4.3% drop in the Dow Jones and a 5% drop in Nasdaq on the same day.
Hours later, Philippine stocks followed suit, recording a 4.02% sell-off among stocks in the PSE index. (Read: Impact of the US Credit Rating downgrade by S&P)
PSE Loss of -3.97% on May 23, 2006
On May 23, 2006 the PSEi fell by 3.97%. Absent any major external or local economic issue, the sell-off was blamed on fears that foreign funds (“hot money”) invested in the country may leave due to rising interest rates in the US.
Market crashes and stock price meltdowns are a regular part of any stock market. Our hope is that Filipino investors have become mature and smart enough to go with the cycle.
Losses are common and to be expected when investing in stocks. If you have the guts and willingness to take on these risks, continue trading stocks and enjoy the whirlwind ride! Happy investing! 🙂
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