Market expected to weaken this week

MANILA, Philippines — Share prices are expected to weaken this week despite a strong finish last week.

“The week’s close at 7,801.72 highlights that bounce is not sustainable. Risk lies at the break below 7,700 which paves the way for a test of the year’s low at 7,514.05 levels, which could occur in the near-term,” BDO Research said in a commentary.

Last week, the Philippine Stock Exchange index (PSEi) ended the week at 7,801.72.

“Market barometer PSEi  rose by 0.81 percent week-on-week for the first time in four weeks to 7,801.72 as investors took recent fall in equity prices as an opportunity to bargain hunt,” BDO said.

Overall, traders said nothing is happening in the market to convince investors to stay for the long haul.

“The market is lacking conviction,” said an analyst in a foreign investment house.

Commenting on what has been happening in the market, the Market Call, in its latest issue said: “After ending October on a high note, PSEi continued its upward month-long climb to 8,216.68 on Nov. 5 as foreigners turned into net buyers to the tune of P16.1 billion in October. Turning expected improvements in earnings for third quarter into reality, the surprise 100 basis point cut in reserve requirements by the Bangko Sentral ng Pilipinas (BSP) on Oct. 30, and third GDP growth back above six percent combined to restore optimism in the equities market. However, its failure to convincingly pierce through the 8,200 resistance level set the stage for profit taking and brought PSEi back close to its end-October level of 7,977.12 by mid-November.”

The Market Call is a joint publication by First Metro Investment Corp. and the University of Asia & the Pacific.

It also said that “bank earnings, which accounted for a 32.2 percent of total net income of constituent firms in the third quarter, would unlikely see a repeat in the fourth quarter of the average 40.9 percent surge in the third quarter as gains from bond holdings/transactions slow down in the fourth quarter amidst fairly flat long-term bond yields.”