PHILIPPINE equity prices are expected to trade on the soft side as the market remains stuck in a correction phase, even if select issues that are oversold attract some bargain hunting.
Foreign selling may continue this week, as investors continue to be wary of an interest rate hike in the US, with the Federal Reserve holding a policy meeting next week on the matter, according to Online brokerage 2TradeAsia.com and Regina Capital Development Corp.
“Foreign fund outflow is becoming substantial, evidenced by the net foreign selling of P1.5 billion [last]week alone, 2TradeAsia.com said over the weekend.
“Foreign investors are shifting to invest in high-yield bonds, ahead of the key Federal Reserve meeting.
Consequently, we see another week of volatility, especially now that the European Central Bank (ECB) decided to refrain from adding stimulus and cutting rates, triggering concerns that central banks around the world are losing ammo in spurring the economy.”
Luis Limlingan, head of research at Regina Capital, the significant support level at 7,550 on the PSEi will likely dictate the market’s direction, “potentially for the rest of the month.”
“We should expect more corrective pressure, rather than a recovery, as both trend direction and technical momentum favors the bears. As such, we highly recommend keeping positions light while selling into recovery for issues trading in a strong downtrend,” Limlingan said.
However, some bargain hunting may set in, said Summit Securities Inc. President Harry Liu
“I think, for the long-term, we’re still very much positive. Because the [Duterte] administration is trying their best to control everything. And with the sound economic fundamentals, I think we’ll do well. It’s just a temporary downtrend as of now,” Liu said.
Investors were concerned about terrorism in Mindanao and the Asean visit of President Rodrigo Duterte, particularly the tiff with US President Barack Obama, Liu noted.
On Friday, the bellwether PSEi declined by 1.11 percent or 85.28 points to 7,581.79, while the All Shares fell by 0.68 percent or 31.19 points to 4,534.34.
The market is closed today in observance of Eid’l Adha or The Feast of Sacrifice.