Stocks out to hurdle 7000-level this week

MANILA, Philippines – The Philippine Stock Exchange index (PSEi) is expected to hurdle the 7,000 level this week.

“Failure to recover would lead to deeper corrections, back to weekly lows of 6,720, possibly extending to 6,600,” said Luis Limlingan, managing director at Regina Capital.

He said the rally is crucial because prices are on a downward, bearish slope.

“We advise to stay light on positions or accumulate issues which are still holding above long-term moving averages. Our strong buy trigger is raised to 7,020 so until this is breached, we expect the index to have sideways volatility this week — a breakout would extend rallies to 7,119 to 7,211,” Limlingan said.

Investors continue to look for positive leads, one of which is the government’s fiscal spending.

“At the local scene, wary investors have yet to see signs government is committed to its spending target in earnest.  January to August data show it has not met its P1.7 trillion spending goal, despite growing expenditures to P1.44 trillion. With a target of P2.559 trillion for 2015, fourth quarter may prove to be a sprint to meet the remaining P1.11 trillion balance,” said Jason Escartin of F. Yap Securities.

Escartin said sentiment would glide with the latest jobless claims data in the US and minutes from the Fed, both scheduled for release on Oct. 8.

“The minutes should give investors a deeper glimpse into the thinking behind the Fed’s recent interest rate decision plus guide for the next meeting towards the end of this month.  While a delay in the liftoff may superficially be seen as a boon for equities, it puts to question the strength of the global economy, particularly China,” he said.

At the same time, Escartin said players may be getting a reprieve from news out of China as it goes on holiday for most of the week.  

“Note that with the manufacturing PMI hovering at a 6 ½-year low of 47.2 (readings below 50 indicate contraction), we may see more intervention from government to stimulate this sector and such would be a welcome respite,” he said.