Market momentum shifting to higher gear

MANILA, Philippines — After breaking past the 7,400 mark last week to hit its highest level in 21 months, the Philippine Stock Exchange index (PSEi) may shift to higher gear this week as most Q3 corporate earnings show solid results despite the lockdowns.

The PSEi ended at 7,382.84 last Friday, recovering some ground after correcting lower for two straight days. On Wednesday, it reached a 21-month high of 7,441.67 following an unexpected 7.1 percent growth in Q3 gross domestic product.

Unicapital Securities Research said investors mostly stayed cautious last week amid the gradual reopening of the economy, noting that overcrowding in public areas could be a possible trigger for another surge in COVID-19 cases, which could force the government to reimpose stringent quarantine restrictions.

Rizal Commercial Banking Corp. chief economist Michael Ricafort  said the next important resistance levels for the main index are at 7,400 to 7,500, which he said could serve as a gateway prior to further upside potential to new highs for the year.

Immediate support levels, meanwhile, are seen at 7,040 to 7,120, which he said would help keep intact the underlying upward trend over the past one-and-a-half months.

Ricafort said market sentiment could also be shaped by leads related to the May 9, 2022 presidential elections such as developments today, Nov 15, the last day for withdrawing or substituting candidates.

The timely approval of the 2022 national budget by lawmakers to avert the risk of a re-enacted budget, especially for various COVID-19 programs and for programs that could pump-prime the economy could also influence market sentiment, he added.

For the COVID-19 situation, Ricafort said the market is anticipating additional measures to further reopen the economy, including smaller lockdowns nationwide within November as already approved, after some areas outside the National Capital Region already adopted the Alert Level System starting Oct. 20 and after NCR eased to Alert Level 2 (from 3) from Nov. 5 to 21.

This  could be eased further to Alert Level 1 as early as December, in time for the Christmas season.

Ricafort said investors may appreciate this as catalysts for further economic recovery, which in turn, could boost corporate earnings.

Overall, this might encourage investors to park more funds in the market and boost sentiment.