Index may recover this week

MANILA, Philippines - The benchmark Philippine Stock Exchange index (PSEi) may recover up to 7,780 this week after a weak performance last week, analysts said.

According to Jonathan Ravelas, chief market strategist at Banco de Oro (BDO), a pullback, if it does happen, may be limited.

“The week’s close at 7,581.79 suggests the market still has some room to test the 7,500 levels in the near-term. Failure for the 7,500 levels to hold could call for further losses toward the 7,250 levels. However, given the decline for the fifth straight week, a pullback could occur but limited toward the 7,760 to 7,780 levels,” Ravelas said.

Last week, the main composite index fell 2.89 percent to 7,581.79.

Analysts attributed the decline to a series of unfortunate events, with a looming US Federal Reserve hike among the biggest of such factors.

President Duterte’s tirade with US President Barack Obama also added to the uncertainty as investors deem that the Philippines cannot afford to strain ties with the US.

Market participants are waiting for the US Federal Open Market Committee meeting scheduled on Sept. 22.

For Victor Felix, equity analyst at AB Capital, immediate support is seen at 7,550, which may serve as a technical rebound point.

“Overall, we may continue to trade lower next week on increasing downward momentum. That said, a technical rebound with an occasional intra-day relief rally may also take place on positive regional foreign exchanges,” Felix said.

Luis Limlingan, managing director at Regina Capital, for his part, highly recommends keeping positions light while selling into recovery for issues trading in a strong downtrend.

“Price stability is a must because a successful support test won’t be enough to sponsor recovery – a solid consolidation followed by technical reversals from indicators will greatly increase rally chances,” Limlingan said.

2TradeAsia.com likewise expects the marekt to continue to weaken until a definite decision emerges from the Federal Reserve policy meeting.

But it advised investors to use the drop in prices to accumulate stocks.

“Having fallen from the earlier 7,700 zone, the local mart may continue to weaken until a definite decision emerges from the Federal Reserve policy meeting.  Dips however, should be taken as windows to accumulate gradually especially when political noises are taken out of the picture.  Aim for stocks that will benefit from fourth quarter run-ups.  Immediate support is 7,500, secondary 7,400, resistance 7,650,” it said.