MANILA, Philippines - After succumbing to profit taking last week as a result of Britain’s exit from the European Union, the stock market is seen recovering this week as president-elect Rodrigo Duterte takes his oath of office on June 30.
Victor Felix, equity analyst at AB Capital said the benchmark Philippine Stock Exchange index (PSEi) is seen retesting the 7,800 level.
“For next week, we expect profit taking to drive the index to the 7,480 and 7,450 levels, before retesting the 7,800 resistance level,” he said.
Felix expects sentiment to be bullish due to the June 30 inauguration of Duterte as seen in the positive reaction last month.
He also said window dressing may happen next week, which could push the index higher and the momentum in foreign buying may continue.
“Thus, we remain unchanged with the target PSEi high of 8,100 level for July,” he said.
On Friday, the index plunged 100.06 points to 7,629.72, while the broader All Shares index lost 55.80 points, or 1.21 percent, to end at 4,542.64.
However, Felix noted that relative to other markets, the PSEi managed to outperform.
“Relative to other markets after the Brexit conclusion, our index outperformed with foreign net transactions reaching more than P1.2 billion. Foreign investors seem to be shifting attention toward the Philippine market, and this may be the drive that the index needs to hit the 8,100 level target for July,” Felix said.
Jonathan Ravelas, chief market strategist at BDO, for his part, said market players may re-enter the market near the 7,500 levels.
“However, should the 7,500 level give way, it may lead to a much larger correction toward the 7,000 to 7,350 levels in the near-term,” Ravelas said.
Last week’s Brexit affected many investors who were positioned for the UK to stay with the EU.
“The pound sterling dipped to 1985-lows, oil prices tumbled, global equities dipped, and the safe have commodity gold rallied,” Felix said.
Ahead of the Brexit referendum, share prices of mining and oil stocks dipped sharply, after staunch anti-mining advocate Gina Lopez accepted the offer to head the Department of Environment and Natural Resources.