PHILIPPINE shares are expected to follow the lead of US markets, which fell on last Friday from the lower- than-expected non-farm payrolls that analysts say provides a case for raising interest rates in the world’s largest economy this month.
The PSEi is likely to encounter more foreign selling this week on the back of what happened on Wall Street, AB Capital Securities Inc. said in a weekly note.
“We expect the US non-farm payroll data to drive sentiment… as it could be the deciding factor on the US Federal Reserve’s decision to raise interest rates soon. A better than expected jobs data may spell further foreign outflows from our market, as it increases the likelihood of a US rate hike this month,” AB Capital said.
Investors on Wall Street pulled out of the market because the data did not constitute a definite direction for an interest rate hike in the US, the first in nearly a decade.
Analysts noted getting mixed and even conflicting hints from the latest jobs data. The US filled 173,000 jobs last month or below expectations, but the overall unemployment rate was down a seven-year year low at 5.1 percent.
The mixed signals prompted stock market investors to head for the exit in an attempt to head off a worst-case scenario. Simply put: nobody wants to get caught once the Fed actually raises interest rates.
AB Capital expects the PSEi to “swing wildly on Monday depending on data results.”
The market is likely in for a cautious sentiment, driven by the US jobs data and the Federal Open Market Committee this month, according to BPI Asset Management.
“The PSEi is expected to trade between 6,850 and 7,150, with the Philippine export figures and further developments in the US as the main catalysts,” it added.
For his part, Luis Limlingan of Regina Capital Development Corp., the market needs to establish a strong support base above the above 6,950 on the PSEi in order to break the 7,110 level.
“Doing so will put prices in a short-term upswing and ultimately retest its breakdown point at 7,272,” Limlingan said, noting that the short-term uptrend would not mean an instant uptrend over the medium-term as the index’s primary trend is still downwards compared to the highs it reached in July.
He expects selling pressure to mount near the resistance at 7,272.
Despite the domination of negative thinking in the market, Jason Escartin of F. Yap Securities Inc. is betting that the PSEi will stay above 7,000-threshold as bargain hunters take in the declines as buying opportunities.
“Since the start of 2014, foreigners were net buyers at P44.3 billion. Based on the PSEi’s chart pattern, a bearish tone might still weigh on gauges. The PSEi’s 30-day simple moving average (SMA) continues to trade below the 200-day, while 100-day SMA is poised to cross below the 200-day SMA, considered another bearish indication—the death cross,” Escartin said.
“But we don’t see the PSEi dipping below 7,000 until after this coming week, with bargain-hunters ready to pounce on opportunities created by exiting foreigners. Moves beyond 7,100, however, could still be short-lived, unless macro catalysts arise,” he added.
On Friday, the PSEi lost 0.66 percent or 46.98 points to end at 7,051.78, while the All Shares fell by 0.75 percent or 30.53 points at 4,023.60.