Investors to play safe on shortened trading week

MANILA, Philippines — With trading shortened to three sessions this Holy Week, investors are likely to hold on to their portfolio unless major developments on the local and global fronts prod them to remain active.

Last week, the benchmark Philippine Stock Exchange index or PSEi closed at 7,018.02, snapping a three-day downturn as investors gobbled up bargains from the sudden selloff.

This was, however, down by 134.86 points or 1.9 percent week-on-week, after the previous week’s gain of 0.4 percent.

The market’s retreat last week was mainly fueled by the US Federal Reserve’s hawkish stance, which had global repercussions on interest rates.

The Fed’s aggressive stance to curb US inflation weighed heavily on investor sentiment and outweighed local economic news, Unicapital said in a commentary.

Recent economic data such as the pandemic-low 6.4 percent unemployment rate and the six-month high four percent inflation also affected sentiment.

For this week, RCBC chief economist Michael Ricafort said major leads that could affect the market include the trend in global oil prices, which have already eased by more than $32 from the peak of $130.50 per barrel posted on March 7, 2022; developments on the Russia-Ukraine conflict; trend on new COVID-19 local daily cases, and the possible increase in dollar remittances from overseas Filipino workers due to the Holy Week break.

Further measures to reopen the economy in the coming months would also lead to greater normalcy, after the adoption of the smaller scale/granular lockdowns under the Alert Level System nationwide since November 2021, Ricafort added.

Against this backdrop, he said the PSEi’s immediate support is seen at the 7,000 mark, with the next important support at 6,800 to 6,900 levels, which prevent any further downward correction in the near future.

For its part, 2TradeAsia said first quarter corporate earnings would also influence sentiment this week and the coming weeks.

In global markets, investors will be looking for bargains in beaten-down growth and tech stocks, betting they will shine as the Fed fights to slow the US economy and tame red-hot inflation.

Growth stocks – which have trounced their valued-focused peers over the last decade – have borne the brunt of the Fed’s hawkish turn this year, with the Russell 1000 Growth index down more than 11 percent year-to-date, compared to a more-than five percent loss for the benchmark S&P 500 index.

By contrast, value stocks – often defined as shares of economically sensitive companies trading at a discount to their total worth – are broadly flat on the year.

Underpinning those moves is the perception that the Fed’s fight against inflation will keep interest rates climbing, eroding the future cash flows that growth stocks are heavily valued on. Value stocks, meanwhile, have found support from a strong economy and surging commodity prices.