PH SHARES WEEKLY OUTLOOK

PSE players advised to tread carefully

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CAUTION is the watchword for the Philippine equities market this week, according to analysts, due to uncertainties about key overseas indicators due later in the week and selling pressure from market price levels.

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Among the developments that will be closely watched in the days ahead are possible actions from the Bank of England. The research arm of investment consulting firm 2tradeasia.com noted, “Given other stimulus efforts already implemented, the Bank of England (BoE) will announce on July 14 [Thursday] its decision whether it will cut policy rates in the wake of UK’s vote to leave the European Union (EU).”

The analyst noted that BoE Governor John Carney a week after June 23’s “Brexit” vote signaled monetary policy would likely be loosened to spur the British economy, and if there was a move to actually do so, “we might expect the local market to focus on efforts that might be taken by other central banks. Volatility is expected to ensue; investors should take on a cautious stance.”

Other key data expected to be released this week include China’s second-quarter GDP growth figures, which economists have forecast to retreat slightly to 6.6 percent from Q1’s 6.7 percent; US retail sales figures for June, which are expected to rise on the back of improved consumer sentiment; and locally, Philippine export data for the month of May, which will be released tomorrow.

For his part, Jonathan Ravelas, chief market strategist for BDO Unibank, Inc., also suggested that lingering concerns over the impact of the Brexit are likely to continue to weigh on the market, particularly with what he sees as high market valuations on the Philippine Stock Exchange index (PSEi).

“Profit-taking activities pushed prices lower last week after the market failed to test the 8,000-point level. High market valuations and renewed concerns arising from Brexit were factors to solidify gains,” Ravelas said in his weekly market overview, noting that the market closed 0.75 percent lower week-on-week.

Las week ended on a low note for local equities, with the PSEi falling 58 points to 7,771, or 0.75 percent lower than the previous week. After reaching a mid-week high of 7,910, market players who did not opt to lock-in gains took a cautious stance to wait for further signals, among them the US jobs data on Friday (Saturday in Manila); a positive indicator—data showed the US added 287,000 jobs in June—but one that arrived too late to have an impact on the local market. As a result of traders’ hesitance, average daily turnover fell 4.13 percent week-on-week to P7.82 billion, although net foreign buying continued to be a bright spot, reaching P584 billion. Declining issues slightly outnumbered gainers, 77 to 74.

“Chartwise, the week’s close below the 7,800-point level signals further weakness towards the 7,500 levels in the near-term. This could be the much-awaited breather the market has been waiting for,” Ravelas explained, adding that if the market held above 7,500 points, a bounce back towards 7,900 points might follow.

Luis Limlingan, business development head at Regina Capital Development Corp., likewise suggested traders be cautious, but due more to selling pressures in the market itself rather than external factors.

“We advise traders to remain cautious this week as short-term divergences are starting to generate selling pressure on the index,” Limlingan said in his weekly outlook, setting the 20-day moving average of 7,715 points as a trigger; if the market falls below that, Limlingan explained, a downward correction to the range of 7,570 to 7,600 points is possible.

In any event, Limlingan does not see the market making significant gains this week. “Holding the 20-day moving average (7,715) will prevent such declines, but upside potential is low due to weak signals across all momentum indicators,” he said.

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