Market facing downside risks this week

MANILA, Philippines — The stock market continues to face downside risks due to the escalation of the US and China trade tensions as well as disappointing second quarter economic growth.

In a market commentary, BDO said “the week’s close at 7,854.39 continues to signal the market to consolidate within the 7,800 to 8,000 levels in the near-term. However, downside risk remains toward the 7,500 levels.”

Last week, the PSEi tumbled again for the third straight week as the US and China continue to be at loggerheads over their trade tariffs.

President Trump said on Friday that he was not ready to make a trade deal with China, fanning fears that the trade war would linger longer than expected.

Trump also said the US would not do business with Chinese telecom giant Huawei Technologies for the time being, sending US stocks plunging immediately after.

The US plans to impose 10 percent tariffs on the remaining $300 billion worth of Chinese imports.

“The market barometer PSEi tumbled by 3.39 percent week-on-week for the third straight week to 7,854.39 on risk-off trades arising from the trade war escalation between the US and China as China allowed its currency to weaken past the 7 to $1 threshold,” BDO said.

Gabriel Jose Perez of P2P Trade Online said the lack of catalysts could continue to dampen the market in the near term.

“Movement could remain sideways in the near term as the PSEi trades with a lack of clear immediate catalysts. Resistance is at the psychological round number of 8,000, while support is at the most recent low around 7,720.

Traders said the economy’s lackluster growth also turned off some investors.

The Philippine Statistics Authority reported last week that the economy grew 5.5 percent in the second quarter, the country’s lowest growth outturn in 17 quarters.

Socioeconomic Secretary Ernesto Pernia said this means that the economy would have to grow by an average of at least 6.4 percent in the second half to reach the low-end of the full-year growth target of six to seven percent in 2019.

“As we have anticipated, these have been challenging times.  The past year, we had enumerated the major ones that we thought would impact our economic performance, namely the El Niño phenomenon, the increasing protectionism in advanced economies, and the election ban on construction activities,” he said.