Metro Manila (CNN Philippines) — It’s been a challenging year so far for the stock market.
The Philippine Stock Exchange index (PSEi) fell by 1.77 percent on Monday (January 18), as it shed 114.41 points to close at 6,335.09, marking its first week in “bear market” territory.
Monday’s close is 22.05 percent lower than the index’s historic high of 8,127.48 on April 10, 2015.
The term “bear market” loosely defines a situation where investors lose confidence in the market and are more likely to sell stocks rather than buy them, or trade at short-term positions. A bear market is generally signified by an index’s drop of at least 20 percent from its latest peak.
Related: PSEi ends 2015 in the red
The PSEi slid into bear market territory on January 11, after it closed at 6,288.16 — 22.63 percent below its peak. It managed to inch up over the next few days, but it did not rise high to break out of the downturn.
Here’s how low the PSEi has closed over the past week compared to its 8,127.48 peak:
Monday, January 11: 6,288.16 (-22.63 percent)
Tuesday, January 12: 6,330.55 (-22.11 percent)
Wednesday, January 13: 6,494.14 (-20.10 percent)
Thursday, January 14: 6,408.76 (-21.15 percent)
Friday, January 15: 6,449.50 (-20.65 percent)
Monday, January 18: 6,335.09 (-22.05 percent)
However, it’s still too soon to say that the PSEi is in a bear market. Just because you’re sneezing doesn’t mean that you have a cold. The index is merely in bear market territory.
Given the term’s loose definition, some analysts believe that an index should sustain its 20-percent-or-higher loss for about two months before a bear market is declared.
Nevertheless, the claws are showing; the PSEi remains in the red for 2016. The index has been losing value. Monday’s level is 8.87 percent lower than 2015’s year-end close of 6,952.08.
How low can it go?
“We’re taking our cue from the significant decline from Wall Street last Friday,” explained Manny Cruz, strategist for Asiasec Equities, Inc.
“New York Fed (Federal Reserve) President William Dudley disclosed that the U.S. economy is gaining strength, which means that they will likely be supporting further interest rate increase.”
Cruz added that plummeting oil prices and China’s stock market drop also contributed to Monday’s decline.
He expects the PSEi to contract even further as the week continues.
“I think the market will go down towards 6,000 to 6,100. It’s a buying opportunity for trading purposes. But nevertheless, any rally should serve as an opportunity to limit exposure in the equities market.”
