Stock market may improve this week

MANILA, Philippines - The stock market may start to improve this week with the end of the ghost month.

At the same time, some analysts advised investors to be cautious following the speech of US Federal Reserve chairman Janet Yellen who said the case for a rate hike has strengthened in recent months.

Immediate support is seen at the 7,800 level with resistance pegged at 8,000 to 8,150, according to market research firm 2TradeAsia.com.

What could help set the tone after the ghost month is the Duterte administration’s economic growth agenda, it said.

“A key highlight would be on the pace of fiscal spending, including the specifics of the Duterte administration’s economic growth agenda,” 2TradeAsia said.

Against this backdrop, infrastructure-related issues such as property and construction would be good bets, it also said.

Investors, 2TradeAsia added, should go for sectors that are set to outperform the market.

 “Participants will also heed details on spending-driven tax drives, particularly the lowering of corporate and income taxes, as well as other revenue-offsetting measures.  Aim for sectors that are set to outperform the market in terms of fourth quarter growth prospects,” it said.

Victor Felix, equity analyst at AB Capital said the ghost month had seen a year-to-date net foreign selling at P6.1 billion, with this week alone contributing P3.17 billion.

 “The ghost month has proved to be a self-fulfilling prophesy, with the index seeing only six out of the past 20  trading sessions of net foreign buying,” Felix said.

Investors waited for Yellen’s speech at the Jackson Hole economic symposium, which could result in a a sell off in global equities.

In her much awaited speech, Yellen said the case for a rate hike has strengthened in recent months.

Some analysts believe that a hawkish tone in this symposium would signal a rate hike in September or December, which may trigger an equity sell off, Felix said.

 “That said, others say there is little to no possibility that a rate hike would occur this year, but only after the US elections have been concluded in January 2017,” Felix said.

The sell-down in the PSEi could possibly continue downward to the secondary support at 7,660 on an unfavorable tone in the speech.

In case of a rebound, however, the PSEi could rebound after trading the 7,840 level today, back to the 8,000 area.

In all, Felix said the index’s overall trend suggests a bearish.

Luis Limlingan, managing director at Regina Capital agreed he index may continue its bearish momentum.

 “As long as the index does not stabilize and create a strong support base between 7,770 and 7,670, we project the index to fall even further to 7,600 to 7,540. On the positive side, recovery above 7,850 will establish a second reaction low and allow rallies to occur up to 7,950 to 8,000 in the next one to two weeks,” Limlingan said.