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The Philippine Stock Exchange in Bonifacio Global City (BGC) in Metro Manila, has become the first in the world to close indefinitely in response to the coronavirus outbreak. This comes as a month-long lockdown of the Philippine capital took effect. Photo: Bloomberg

Coronavirus: Philippines closes financial markets indefinitely amid pandemic

  • The Philippine Stock Exchange is the first to suspend trade until further notice to halt the spread of the Covid-19 outbreak
  • This comes as President Rodrigo Duterte widened a month-long lockdown of Manila to the entire island of Luzon, home to 57 million people
The Philippines halted stock, bond and currency trading until further notice, becoming the first country to shut financial markets in response to the widening coronavirus pandemic.

The closures take effect on Tuesday, according to statements from the Philippine Stock Exchange and the Bankers Association of the Philippines.

“There will be no trading at The Philippine Stock Exchange, Inc. and no clearing and settlement … until further notice to ensure the safety of employees and traders in light of the escalating cases of the coronavirus disease,” the exchange said.

The Philippine Stock Exchange while it was in operation. Photo: Bloomberg
The moves follow President Rodrigo Duterte’s decision on Monday to widen a month-long lockdown of the capital region to cover the country’s main Luzon island, home to at least 57 million people. The virus has infected at least 140 people in the Philippines and killed a dozen.

Philippine equities have tumbled more than 30 per cent this year, among the biggest declines in Asia, as stocks around the world plunged on fears of a global recession. A US-listed exchange-traded fund that tracks the Philippine market fell by a record 19.5 per cent on Monday after the bourse announced it was shutting.

“This restricts exit the mechanism so it won’t be taken kindly by investors who don’t like their flow of funds constrained,” said Manny Cruz, strategist at Papa Securities.

“What the market would do when trading resumes depends on the state of global markets. We will see a sharp sell-off if the global weakness continues and a sharp rebound should there be a recovery worldwide,” Cruz said.

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Shutting markets during times of crisis is extremely rare but not without precedent. America’s stock market closed for almost a week after the September 11 terrorist attacks in 2001, while Hong Kong halted trading in the wake of the Black Monday crash in 1987. Greece shut its stock market for about five weeks in 2015.

A survey of international investors conducted by the Hong Kong stock exchange in December 1987 found unanimously that the closure had negatively affected the exchange’s international reputation and had eroded confidence in the Hong Kong market, at least in the short term.

While some commentators have argued that countries including the US should consider temporary market closures, exchanges and regulators have mostly downplayed or rejected the idea.

Philippines imposes home quarantine on entire Luzon island

Bourses in Korea and Indonesia said they have no plans to shut trading, while Australia’s exchange said it and market regulators “have a range of measures, some of which have already been taken, to maintain the market’s orderliness and resilience”.

US Securities and Exchange Commission Chairman Jay Clayton said in an interview on CNBC on Monday that stock markets should continue to operate. Nasdaq Inc. CEO Adena Friedman told Bloomberg TV that “it’s much better” to keep the markets open, citing companies’ capital-raising needs and saying “pent-up issues” can occur with closures.

The New York Stock Exchange sent a note after-hours on Monday saying all NYSE Group markets including trading floors would “continue to operate normally tomorrow”.

But some analysts have raised the prospect of other exchanges following suit.

“Given the unprecedented speed of the slump in equity prices, it has been suggested that stock exchanges might be closed soon if things don’t turn around,” research house Capital Economics said in a note on Tuesday.

AdMacro research head Patrick Perret-Green had also raised the prospect in a note issued over the weekend, before the Philippines move.

“We have seen it before. I believe we could see it again,” he said. “Governments do not need or want the added stress and distraction at this time.”

Hong Kong stock slide mirrors flash sale during European debt crisis

Capital, however, rate it as an ineffective move to salve investor sentiment and expect – as in the Philippines – health reasons to be invoked should other bourses shut.

“On the rare occasions when stock markets have been shut in the US in the past, it has usually only been for practical reasons, such as after 9/11, rather than as means of trying to restore confidence …(It) might not work in any case.

“Investors might end up selling anything else they could if they needed to raise cash in a hurry.”

Global markets are in meltdown as the pandemic spreads, with roughly US$14 trillion in shareholder value erased and even safe assets such as gold have been sold to cover losses.
This article appeared in the South China Morning Post print edition as: Philippines shuts stock market due to pandemic Thanks to Virus
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