The Philippine stock market looks poised for further dips in the days ahead as expectations of sustained volatility in the global markets could outweigh the impact of even positive corporate earnings results due for release this week.
Easing back to the 7,700-point territory after touching the 7,900-point mark last week, the Philippine Stock Exchange index (PSEi) may find support at a lower level of 7,400 if the benchmark index slides below 7,700, an analyst said.
AB Capital Securities Inc. in its weekly market advisory said it sees the market remaining “bearish in the near term” as investors stay on the “defensive and wait for potential reversals before entering the market.”
“Meanwhile, the one-month trend also remains bearish, with the index failing to record higher highs. This suggests that the overall trend is still downward,” it added.
BPI Asset Management said the PSEi is expected to move this week with a slightly downward bias between 7,600 and 7,000 as traders will try to take profit when positive first-quarter corporate earnings present the opportunity.
“Choppy movements” of prices on the back of high global market volatility could be more visible during intraday sessions, said Regina Capital Development Corp. Managing Director Luis Limlingan.
“We still advise a cautious buying strategy as the index faces a lot of selling pressure, especially that prices are trading near their key support,” Limlingan said.
If the market breaks major support at 7,700, it could come under heavier corrective pressure at 7,500 points or even 7,360 points, he added.
Foreign net selling is also seen weighing down the market in the week ahead, with stocks expected to face selective trade, said Jason Escartin of online brokerage firm 2TradeAsia.com.
“Locally, selective trades may be seen, with the overall theme of foreign pull-back continuing to persist,” he said.
“Brave pickers might draw confidence from the IMF’s [International Monetary Fund] view that the Philippines is poised to counter risks from divergent global monetary policies, plus China’s move to improve lending by lowering its reserve requirement ratios. While this could limit downside risks, upside opportunity is not yet clearly seen,” Escartin added.
He also said oil prices will continue to influence market sentiment – after they breached the $60 per barrel mark last week – which could dampen buying with the potential underlying increase in prices as crude oil prices rise.
“The mining and oil sector may stand to benefit from recovering prices, while few consumer-oriented firms have locked in lower prices via derivatives.”
The market will also watch volatility in the currency market, “especially with political progress within the euro block,” Escartin added.
On Friday, the bellwether PSEi lost 0.68 percent or 53.06 points to finish at 7,763.21, while the All Shares index slipped 0.62 percent or 28.11 points to 4,487.81.