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PSEi may weaken anew this week
For this week, major support is seen at 5,850 to 5,870 level, which could prevent further downward correction or toward a potential retest of the 5,691.74 immediate low posted on Aug. 4.
AFP/File

PSEi may weaken anew this week

Iris Gonzales (The Philippine Star) - August 31, 2020 - 12:00am

MANILA, Philippines — Share prices may continue to weaken this week after the Philippine Stock Exchange index (PSEi) declined for the second straight week, according to analysts.

For this week, major support is seen at 5,850 to 5,870 level, which could prevent further downward correction or toward a potential retest of the 5,691.74 immediate low posted on Aug. 4.

Michael Ricafort of Rizal Commercial Banking Corp. said the 5,700 to 5,800 level has been a strong support over the past four weeks amid record low local government bond yields mostly at two percent level and short-term interest rates at one percent level, which partly benefitted the search for higher returns in riskier assets such as equities.

“Record low interest rates and  still relatively large amounts of excess liquidity, both as a result of aggressive monetary easing and other measures by central banks locally and in many countries worldwide, could prompt the search for higher returns in riskier asset classes and could still lead to liquidity-driven gains,‘’ Ricafort said.

He also said that the recent downward consolidation has been largely brought about by the relatively high new COVID-19 cases which could potentially slow down the country’s economic recovery prospects and could have an adverse effects on the sales and net income of some listed companies.

Since the start of 2020, the PSEi declined by 24.7 percent versus 7,815.26 at the end of 2019 as this may reflect market expectations about the possible decline in the sales and net income of listed companies largely due to the adverse business economic effects COVID-19 lockdowns.

At the same time, Ricafort said from a low of 4,039.15 posted on March 19, the PSEi has already gained 45.7 percent, thereby making it prone to bouts of profit-taking.

2TradeAsia for its part said the index could head north of 6,000 to 6,200. It sees immediate support at 5,700, secondary at 5,500 and resistance at 6,000.

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