Philippine shares are expected to move sideways in the absence of fresh leads this week as the market consolidates previous gains and tackles lingering disappointment over lower-than-expected first-quarter economic growth announced last week.
The government on Thursday released data showing gross domestic product GDP grew 5.7 percent year-on-year in the first quarter, off the conservative growth target of 6 percent.
“For this week, we expect the selling mood to linger as the market will be seeking to establish a base of support given the recent developments,” DA Market Securities Inc. equity analyst Gab Aguila said in a text message.
Aguila said the surprise GDP result will increase volatility in the near term with a downward bias, as the market will look to test the support levels of recent months.
He added that ancillary selling pressure may contribute to the local market’s weakness as the US economy also reported a contraction for the first quarter of this year. The US economy shrank 1 percent in the first quarter.
Analysts see the market’s support levels for this week at 6,650, 6,550, and 6,400 points.
“We expect the market to test these support levels, after which the market will most likely enter into a wide-range consolidation which may span weeks,” brokerage DA Market said in its weekly outlook.
Nevertheless, the brokerage said it continues to be bullish about the market over the long term.
“We recommend a buy on stocks that bottom out when the market hits support levels. Current resistance levels present selling opportunities as we expect the market to sell into strength as the market normalizes,” it added.
On Friday, the market ended the week in the red, closing lower for a second day as the below-forecast GDP result continued to cast a pall on sentiment.
“The market continued to correct. The morning session [of Friday’s trade]showed small signs of a rebound but that was quickly tempered by the selling mood,” Aguila said.
The Philippine Stock Exchange index (PSEi) settled at 6,647.65 on Friday, losing 29.02 points or 0.43 percent, while the wider all shares went down by 6.52 points or 0.16 percent to 3,997.57.