Philippine Capital Returns to Stricter Lockdown; Stocks Fall

The Philippine capital will return to a stricter lockdown from Tuesday as coronavirus cases surged more than fivefold after movement restrictions were eased in June. Stocks fell to a two-month low.

President Rodrigo Duterte approved his Cabinet’s proposal to tighten restrictions in metro Manila and nearby provinces for 15 days, following doctors’ recommendation to reimpose the lockdown as a spike in infections overwhelmed the health care system.

The Philippines’ benchmark stock index dropped 3.6%, its biggest decline since May 28 and the biggest loser in Asia on Monday. The peso strengthened 0.1% to 49.09 per dollar, trading near its strongest since November 2016 as a lockdown is expected to curb imports and weaken demand for the U.S currency.

“This is unlikely to stop the sell-off by investors,” says Manny Cruz, strategist at Papa Securities Corp. “There is perception that a localized lockdown will not work anymore and a more stringent quarantine is needed since the infection is no longer in cluster but community wide. This could derail the expected third-quarter recovery.”

Finance Secretary Carlos Dominguez said stricter restrictions may hurt consumer demand and production in the short term, but will be positive in the long run if it will strengthen the health care system. Last week, he said the economy -- which is facing its deepest contraction in three decades -- was already starting to recover.

“The Philippines is indeed headed into a severe crash landing with the probability of the economy returning to its former glory any time soon now declining by the day,” ING Bank Philippine senior economist Nicholas Mapa said.

Local virus cases rose again by a daily record to 103,185 on Sunday, the second-highest in Southeast Asia. A total of 2,059 have died from the outbreak.

Under the stricter quarantine called a modified enhanced community quarantine, stay-home orders will be reimposed and public transport - including air travel - will be halted. Malls, except leisure shops, and restaurants with take-out and delivery options can open with half of their workforce. Barber shops, salons and gyms would be shut.

Duterte approved the hiring of 10,000 medical professionals and the recommendation to issue work and quarantine passes to minimize movement, spokesman Harry Roque said.

“So far, the plans on how to support the health care system have been lackluster,” says Edmund Lee, CEO of the Caylum Trading Institute. “Fiscal policy needs to come out with very clear steps to support an already fragile stock market.”

©2020 Bloomberg L.P.

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