Philippines, Indonesian equities tumble 4% on lockdown extensions

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(Aug 3): Philippines and Indonesian stock markets tumbled on Monday after restrictions were extended in the capital cities of both countries as coronavirus cases surged, denting hopes of a quick economic recovery in Southeast Asia's two most populous nations.

The Philippines reimposed a stricter coronavirus lockdown in and around the capital for two weeks from Tuesday, authorities said on Sunday, as the country struggles to contain infections
that have jumped to more than 100,000 cases.

The benchmark stock index tumbled on opening and deepened losses to 3.9%, hitting a two-month low after central bank data showed remittances in May fell 19.3%. Remittances from overseas workers is an important source of foreign money and especially important for the Philippines, which routinely posts trade deficits.

"There is definitely a heightened risk of near-term losses in the local benchmark stock index and rising cases can pour cold water on expectations of a swift economic recovery," said
Daniel Dubrovsky, analyst at IG.

He pointed out that the drop in remittances was the worst decline since 1999, which further put the economic outlook at risk given that in 2019, remittances accounted for about 10% of
overall GDP.

With lockdowns prompting salary cuts and job losses overseas, remittances have fallen across the globe since the start of the pandemic and are expected to fall further in 2020.

"The path for the peso is less clear due to what has been significant depreciation in the U.S. Dollar amid fading global market volatility," he added.

Indonesian stocks slid nearly 4% in their biggest intraday fall since March 30, after local media reported the extension of restrictions for another two weeks, as authorities failed to control the spike in COVID-19 cases.

Lenders Bank Central Asia Tbk and Bank Rakyat Indonesia (Persero) Tbk slid nearly 7% and 5%, respectively, while household products maker Unilever Indonesia Tbk lost nearly 4%.

The rupiah and peso were unperturbed, enjoying some calm after the dollar ended July with its worst drop in a decade amid a surge in cases in the United States.

Indonesian 10-year bonds yields opened lower, extending recent declines to hit their lowest since March 9, although they later ticked up to be in positive territory.

"This may be the markets anticipating a softer-than-expected outcome for local CPI data today. That may further boost easing expectations for the Bank of Indonesia," IG's Dubrovsky said.

Indonesia's inflation data is expected at 0500 GMT.