WEEKLY SHARES OUTLOOK

Oversold market to see some gains despite volatility

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PHILIPPINE shares are in oversold conditions and may post some gains this week—despite the underlying volatility—as investors start pricing in a US interest rate hike in December and uncertainty over the economic policies of a Donald Trump presidency.

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While markets remain volatile, analysts said the main PSEi may see some buying support this week after dropping to the 6,800 level last week.

“The index is still in a corrective environment, so watch out for the resistance points at 7,100 to 7,160 for signs of pressure. Breaking both levels would allow further recovery to 20-day moving average or 7,297. While a failure to do so will send the index back in the corrective phase,” Luis Limlingan, managing director of Regina Capital Development Corp., said.

Online brokerage 2TradeAsia.com noted the upcoming US interest rate hike in December was confirmed by Fed Chair Janet Yellen last week. As such, markets are expected to focus on it this week but its impact may no longer have the kind of bite on market sentiment as it did before.

“With the Dow Jones Industrial Average (DJIA) gaining 3 percent since the November 8 election, it appears that investors are now shrugging off any concerns on the looming new US government. It seems they’ve already factored in what stocks could benefit from the new administration’s proposed policies. Clearly, President-elect Trump announced some of his plans, and these include ramping up government spending, reducing corporate income taxes, lessening environment and financial regulations, among others,” 2TradeAsia.com said.

“Investors are also seen to start embracing the idea of a Fed rate hike, which brings back positive reception from the Fed’s move in December 2015 to raise rates by 25 basis points. Pricing in all these political factors, the Federal Reserve reiterated its intent to hike interest rates and, of course, Fed as being data-dependent, economic data releases are pointing to a better US economy,” it added.

With the foreign exchange rate hitting P49:$1, 2TradeAsia.com noted the export sector, as well as remittances and foreign direct investments would benefit from a weaker peso.

With the sell-off that brought the PSEi down to 6,800, the online brokerage noted the market must seem cheaper to foreign funds while a portfolio rebalancing shapes the region.

“While prospective ‘inflection points’ may be seen at 7,400, it would be best to stay on range-trade mode, until solid evidence of accumulation on lows comes about. Carefully select winners for 2017 prospects, especially those that can provide stable payout ratios,” 2TradeAsia.com said.

For his part, RCBC Securities Research Analyst Anton Alfonso noted the likelihood that many investors would steer clear of the market at this point. “Investors would likely remain on wait-and-see mode this week in the absence of significant corporate developments as they weigh the impact of a Trump presidency.”

On Friday, the PSEi increased 0.25 percent or 17.61 points to 7,067.73, while the broader All Shares improved by 0.28 percent or 11.88 points to 4,254.28

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