Downward bias as investors turn cautious

MANILA, Philippines — After a roller coaster ride last week, stock trading shifts to a downward bias this week as investors digest the recent downgrade in the country’s credit outlook, as well as the wider repercussions of the first locally transmitted case of the more contagious coronavirus Delta variant.

The benchmark Philippine Stock Exchange index (PSEi) ended lower for a second straight week after reaching new highs the past months.

The PSEi declined 141.09 points or 2.1 percent week-on-week to close at 6,693.83 last Friday although it still gained by 10 percent since the immediate low of 6,080.94 posted on May 14, 2021 or a little over two months ago.

The benchmark gauge reached a low of 6,653.53 and a high of 6,913.87 in a highly volatile week of trades.

Chief economist Michael Ricafort of Rizal Commercial Banking Corp. said he sees immediate minor support for the PSEi at 6,600, which helps maintain the underlying strong upward momentum over the past two months.

The immediate major support is seen at 6,450 to 6,570 levels, which preserves the structural integrity of the strong upward trend over the past two months or since posting the 6,080.94 immediate low on May 14.

Immediate resistance is seen ranging from 6,850 to 6,900 levels, Ricafort added.

In all, the factors that affected the market’s performance last week included lingering global concerns over the highly infectious Delta variant and Fitch Ratings’ revision of its outlook on the Philippines to negative from stable.

For the coming weeks, he said investors would be keeping a close watch on several local and external factors.

The most important factor which investors would be taking a close watch this week is the progress in containing COVID-19 cases locally, in the region and worldwide, Ricafort said.

“New strategy on vaccination programs – shift to population protection of 50 to 60 percent of the population – from herd immunity which is at least 70 percent of the population would also be a factor,” he said.

The possible further easing of the headline inflation, especially in July 2021, amid the temporary reduction in tariffs for imported pork and rice could also improve sentiment.