WEEKLY SHARES OUTLOOK

PSEi to drift to 6,800 on GDP data, US uncertainty

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Share prices are expected to go further south this week to drive the benchmark index to as low as the 6,800-point levels given uncertainty on the direction of US foreign policy under the Trump administration, and ahead of the release of the Philippine gross domestic product (GDP) data this week.

“We expect the PSEi to track the international markets again as global investors look for more clarity regarding US President-elect [Donald] Trump’s policies. Investors will also monitor local developments, especially the release of third-quarter GDP growth figures,” BPI Asset Management said.

The Philippine Statistics Authority (PSA) is scheduled to release the third-quarter GDP data on Thursday, November 17.

Online brokerage firm 2TradeAsia.com said a volatile market with sharp declines and increases here and there will be persistent as “jitters caused by Trump’s win may spill over this week,” but mostly with a bias on the downside.


Most decliners are expected to come from the property sector, as fears of business process outsourcing (BPO) companies pulling out of the Philippines under a Trump administration may “hurt the office leasing revenues of property companies,” it said.

“On top of this BPO issue, there are concerns that remittances from overseas Filipinos may drop sharply as investors take Trump’s campaign talk, like bringing back jobs to the US and prioritizing Americans for job offers, at face value. While we find these fears way exaggerated, negative sentiment may still outweigh the strong fundamentals,” 2TradeAsia.com said.

While acknowledging the market’s vulnerability, Luis Limlingan, managing director at Regina Capital Development Corp., also saw prospects of a technical rebound. He said there may “a strong likelihood” that the PSEi would drop to as low as the 6,850-point level this week, which may trigger “bargain hunting” if it happens.

“The first one to two trading days are crucial for the PSEi as it will attempt to recover above a breakdown point of 7,090… Sharp intraday swings will be a common sight this week, with bias on the downside. On the other hand, the PSEi’s near-oversold readings could initiate a recovery, but note that this will be temporary until all technical threats subside. The maximum upside we see this week is at 7,300,” Limlingan said.

“As such, we discourage any aggressive buying this week and, instead, wait for the index to stabilize first and establish a reversal pattern before repositioning. Selling into rallies is a priority, especially for issues currently trading in a downtrend,” he added.

Justino Calaycay Jr., head of research and marketing at A&A Securities Inc., said the market has not fully factored in the ambiguity of Trump’s policy direction moving forward, which could still weigh on trading sentiment, with only slight upticks on the sides.

“An overhang of the US elections, particularly as protests spread in major cities blurring an otherwise peaceful exercise and road to transition of power, will continue to [cast a pall of]cloud over the markets entering this week,” he said.

Calaycay said there are four factors that may cushion the crash of the PSEi to the 6,850 to 6,900 levels and preserve the year-to-date gains: a surge in corporate earnings that in aggregate could lead to positive territory, 2) the result of the third-quarter GDP due on Thursday, 3) positive investment pledges from President Duterte’s trip to Malaysia, and 4) a probable technical rebound given previous market declines of more than 10 percent cumulative from its peak this year.

“Meanwhile, a December US Federal Reserve rate hike moves back to the uncertain column following Trump’s win,” he added.

On Friday, the main PSEi tumbled 206.78 points or 2.88 percent to 6,975.09 points, its lowest close since March 9 this year, when it finished at 6,948.18. The broader All Shares index dropped 2.36 percent or 102.05 points to 4,220.21.

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