Index to remain in tight range

MANILA, Philippines — Share prices are expected to trade within a tight range this week with immediate resistance seen at the 6,000 level after seeing support at the 5,700 to 5,800 level  last week.

In a commentary, Michael Ricafort, chief economist at Yuchengco-owned Rizal Commercial Banking Corp, said the main composite index remained well supported despite the two-week modified enhanced community quarantine and the deeper-than-expected 16.5 percent year-on-year contraction in the second quarter gross domestic product (GDP).

He said the financial markets appeared to have already priced in the 16.5 percent year-on-year decline in the second quarter GDP.

Last week, the PSEi declined for the fifth straight week or down for the seventh week in eight weeks, by 82.43 points or 1.4 percent.

He said the continued spike in local COVID-19 cases and the resulting two-week quarantine in Metro Manila and in nearby provinces could adversely affect recovery prospects for both the economy and corporate results of some listed companies.

“Since the start of 2020, total declines of the PSEi already stood at 1,969.24 points or 25.2 percent as this may reflect some market expectations on the estimated declines in the net income of some listed companies for 2020 versus in 2019, largely due to COVID-19 lockdowns,” Ricafort said.

Moving forward, factors that may affect sentiment include possible further monetary easing measures and other economic reform measures such as the Bayanihan 2 and increased infrastructure spending, he said.

External factors, meanwhile, include continued improvement in global market risk appetite amid optimism on a possible new US economic stimulus for COVID-19 as early as Aug. 7, better US jobless claims data and more positive developments on possible COVID-19 vaccines recently.