Selling spree Monday

The Dow fell sharply in last night’s trading shedding off another 203 points to kick off this week on a bearish mood. Despite pulling modest gains halfway into the session, another late rally southward, which has been eminent for weeks now, proved to be another pivotal setback for equities.

Earlier, Asian and European shares got hammered with even Japan’s Nikkei falling to its 26-year low. There is even talk that the US might follow the Japanese experience when it suffered a long recession after their real estate bubble burst in the late 80s. Almost the same premise now hounds the US with the housing collapse blamed as the culprit for their current woes.

The Phisix fell over 12 percent in yesterday’s session and trading was even stopped momentarily for 15 minutes due to the massive sell-off shades of what happened in Moscow weeks ago when their stock exchange went on a free fall. A lot of wealth has already been lost in the PSE in this past few weeks. Consumer demand in this country is expected to slow down and not even the holidays could make people spend in the level they used to.

Despite the peso’s fall against the dollar, it is not yet ‘all bets are off’ in terms of positive effect to the economy especially for the beneficiaries of remittances. Families of OFWs are likely to hoard their dollars anyway and this continued slow consumer spending would just keep the real economy dampened. This is a ripe scenario for a properties bubble especially here in Manila. Banks that are highly exposed to the property sector would feel the pinch which would lead to a possible credit crunch in the financial system. On the surface, the crisis has barely affected our everyday lives, but the signs are coming and their coming fast.