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Cebu Pacific Stocks Normalize After ‘Fat Finger’ Plunge

The price drop was caused by a "fat finger," or typo error, caused by a local broker
IMAGE WIKIPEDIA
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Cebu Pacific's stock prices are back to a stable 87.00 following a major price drop on Tuesday, July 9. 

An alleged “fat finger,” or typo error, by a local broker caused Cebu Air's share price to plunge as much as 38 percent during the Philippine Stock Exchange's no-cancel period at the end of the day. The stocks closed at 58.00 after opening at 93.40, costing Cebu Air P21.3 billion in market value due to a fat finger, or typo error. 

How did this happen?

According to an alert from brokerage firm COL Financial Philippines, the error happened due to PSE’s practice of removing dynamic thresholds during closing periods. Dynamic thresholds limit market swings to 10 percent of market prices and only take effect from 9:30 a.m. (when the market opens) to 3:15 p.m.-3:20 p.m. (during the pre-close periods). 

“Without the thresholds, the security is open to move within the extreme limits of the day’s price Ceiling and Floor (which is 50% over or below the previous day’s close),” said COL Financial Philippines.

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Back to normal 

After July 9's steep drop in stock prices, Cebu Air’s shares rose by 50 percent the following morning when stocks opened at 87.00 per share, retaining a steady market value throughout the day.

On Monday, July 15, Cebu Air fully recovered from the price drop, exceeding their value prior to the trader error by 0.10 with an opening set at 93.50. Less than a week after the plunge, Cebu Air stocks have peaked, with a Tuesday morning opening of 95.20, which is currently their highest opening of 2019.

The last week has been a turbulent ride for Cebu Air. The local airline carrier hit both their 52 week low (at 58.00 on July 9) and their 52 week high (at 95.95 on July 16) within the span of seven days.

In a company disclosure, Cebu Air confirmed that the plunge was caused by “a trading error made by a Philippine broker in the last few minutes of trading on July 9.” They added that there was “no undisclosed information that may have triggered the unusual price movements “ of Cebu Air shares during this period.

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Anri Ichimura
Staff Writer, Esquire Philippines
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