Stocks, peso and bonds tumbled yesterday in tandem with Asian markets which dropped to eight-week lows as the US credit crisis worsened.

Local share prices dropped 3.88 percent last Monday while the peso skidded to a three-month low of 41.72 to the US dollar yesterday, down from 41.54 last Friday. The peso was last seen at this level last December 7.

Total turnover at the Philippine Dealing System yesterday reached $794.225 million from $640 million Friday.

With risk aversion likely to continue, traders said the peso might fall further, targeting the next resistance at 42.08.

"There is risk aversion, investors are selling stocks," Marcelo Ayes, senior vice president of Rizal Commercial Banking Corp., said.

Traders said the worst is yet to come and as investors shun emerging markets, further decline in the stock market can be expected and this spells trouble for the peso. However, it should be a "healthy correction" for the currency since it has been technically overbought, traders said.

"There is a pressure to the peso but it’s a long awaited correction," Ayes said.

Ayes said the peso might target its next resistance, 42.08, and then possibly drop to 42.65-42.70 before it gains ground again.

Bonds due in 2032 were quoted at 95.5/96 cents to a dollar and 2031 bonds were at 109.25/109.75, both down by a quarter of a point

Its five-year CDS (credit default swaps) widened by 20 basis points to 275 basis points.

Foreign funds have pulled out P17 billion from January.

The Philippine Stock Exchange index dropped to 2,793.68, a drop of 112.85 points.

Losers swamped gainers 118 to 5 with only 26 stocks unchanged.

Trading turnover reached 692.42 million shares worth P2.17 billion.

Net foreign selling was heaviest last January at P12 billion, abated to P1.7 billion by February and P3.7 billion for the month.

Aaron Say, First Metro Securities Brokerage Corp. analyst, also added that the long weekend have also added on the market’s huge decline since investors also take to profit ahead of the Holy Week break.

"Most issues today are battered. Perhaps many are cashing in before the long weekend. And with too much uncertainties you can’t opt to stay in the market." said Say.

Accord Capital Equities, Inc. analyst Claire Quiray meanwhile noted the bargain hunting among blue chip stocks which skidded in yesterday’s bloodbath.

"Some investors believe that it is always a good buy to pick stocks that will touch 10 percent down in a day, prompting them to snap up shares. There are a many good stocks which declined by that much yesterday," said Quiray.

Philippine Long Distance Telephone Co. was down P110 to P2, 620.

Ayala Corp. was down P12.50 to P387.50.

Manila Water Corp. was down P0.75 to P17.50.

SM Prime Holdings, Inc. was down P0.10 to P7.90.

Bank of Philippine Island was down P3 to P48.

Megaworld Corp. was down P0.12 to P2.06.

Asian currencies slipped, with the South Korean won hitting a more than 2-year low.

The Indonesian rupiah and Malaysian ringgit were the other big losers in Asia. The South Korean won tumbled to 1,030.9 to the dollar at one point, down about 3.3 percent from late Asian trade on Friday and hitting its weakest level since December 2005.

The Malaysian ringgit fell about 1 percent to 3.20 per dollar as investors sold risky assets.

"Carry trade is unwinding," said a trader in Kuala Lumpur.

The rupiah fell as far as 9,340 per dollar, down about 1 percent from late Asian trade on Friday to its weakest level since Jan. 28.