Market volatility likely to persist

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A lack of catalyst is likely to keep trading on the Philippine Stock Exchange more volatile, as investors tend to sell on at each and every opportunity.

Foreign selling plagued the market last week, registering more than P1 billion in net outflows in three out of five trading days.

“The market continued to be highly unpredictable as investors remained fickle due to the lack of enticing corporate news,” said Anton Alfonso, RCBC Securities Inc. research analyst.

“We expect this volatility to continue… as market players will look to trade the range of their favorite picks during this gap between earnings seasons,” Alfonso said.


On Friday, the benchmark PSEi declined by 0.36 percent or 26.95 points to 7,526.70, while the All Shares lost 0.32 percent or 14.13 points to 4,340.87.

Financial markets are closed for Independence Day on Friday, June 12, giving investors a four-day trading week.

The PSEi is expected to trade between 7,450 and 7,650 this week, “with downward bias” as “movements will be strongly influenced by local corporate news and global economic data releases,” BPI Asset Management said in a weekly review.

For his part, F. Yap Securities Inc. Investment Analyst Jason Escartin said “sober trades” will likely mark the four­day work week, given external uncertainties that influence much of the local market in the absence of domestic catalysts.

“Major support is pegged at 7,000, although gauges might firm up within 7,400 to 7,500 for now, until net foreign selling abates. [Investors should] spot for good trading limits in defensives, especially those that are quick to rebound from oversold positions,” Escartin said.

The market is up for some levels of intraday volatility, Regina Capital Development Corp. Managing Director Luis Limlingan said, citing negative chart readings and the prospect of investors taking to the sidelines in a cautious stance against negative factors that may influence overseas markets.

“Weak technical readings, together with the index’s two­month downtrend channel will continue to pose a threat on 200­day moving average so chances of a breakdown are still relatively high at this point. Like last week, we advise taking advantage of rallies to lighten or sell positions until a clear shift in trend is spotted,” Limlingan said.

Despite a pessimistic outlook this week, AB Capital Securities Inc. chose to take a contrarian view, saying the likelihood of a “slightly bullish” trend may come about as hopes of resolving the debt problems of Greece could weigh on global markets and the “lower­than­expected” Philippine inflation data, released on Friday, is finally absorbed by the domestic market.

Reports over the weekend noted that a dialog involving German Chancellor Angela Merkel, French President Francois Hollande and Greek Prime Minister Alexis Tsipras prompted further discussions toward a financial aid for debt-stricken Greece. This is expected to happen on the sidelines of an upcoming summit in Brussels on June 10.

This will likely create a semblance of that proverbial light at the end of the tunnel for markets this week, AB Capital said.

On the other hand, Philippine inflation stood at 1.6 percent in May the slowest pace in 20 years. This may encourage some buying.

“However, given that the mid­term outlook remains bearish, investors may want to use index rebounds as an opportunity to lessen equity exposure in their portfolio,” AB Capital added.

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