PSEi may test 8,000 level this week

MANILA, Philippines - The Philippine Stock Exchange index (PSEi) may test the 8,000-level next week amid investor optimism on the Duterte administration and easing concerns over Brexit as global central banks hinted of providing stimulus if necessary.

At the same time, analysts said profit taking could also limit the market’s rise.

“Continue to expect a test toward the 8,000 levels in the near-term, a break below 7,800 levels could prompt a much larger correction toward 7,500,” said Jonathan Ravelas, chief market strategist at Banco de Oro.

He said last week, local and foreign players pushed prices on optimism on President Duterte’s plans for the country.

Investors expect Duterte to shift the country’s growth rate to a higher path, focusing on agriculture, infrastructure, and peace and order.

At the same time, Ravelas said, higher valuations have limited the market’s rise and prompted some profit taking following the test of 7,980.75.

The local stock barometer closed at 7,830.35.

Luis Limlingan, managing director at Regina Capital, said the index is expected to test the 7,900 to 8,000 resistance points this week.

“However, its flat momentum signals can cause sudden intraday reversals just like what happened during last Thursday’s trade,” he said.

PSE president Hans Sicat said many markets have recovered from the initial impact of Britain’s move to leave the European Union (EU).

“The Philippine market generated an additional impetus from the historic transition to the Duterte administration. We are hopeful we will have a strong second half supported by solid economic fundamentals and expectations of further growth under the new administration,” Sicat said.

He said the message of President Duterte that contracts would be honored and that rules should not be changed in the middle of the game is also positive for business.

“We are optimistic of the incoming administration’s support for business and economic growth, under a backdrop of improved efficiencies in government processes and peace and order,” Sicat also said.

2TradeAsia.com, meanwhile, said that because of Brexit, prospects for a rate cut and fiscal stimulus are back.

“The political overhang in Britain since the latter ended its 43-year membership in the 28-country European bloc last week is bound to support louder calls for a potential rate cut from the Bank of England to stave-off further capital funds outflow,” it said.

As such, industrialized countries’ central banks including, the US Federal Reserve, are likely to support either a status quo on their present monetary policy until the political vacuum in Britain normalizes following the resignation of British Prime Minister David Cameron.

The situation may start to normalize in October once Cameron’s successor undertakes the formal process of leaving the EU.