Investors still in risk-off mode

MANILA, Philippines — Most stock market investors are still in a risk-off mode amid the prevailing market uncertainty but at the same time, traders can also use the opportunity to accumulate some bargains, analysts said.

Stock portal 2TradeAsia said it sees immediate support at 6,200, while resistance is at 6,500.

The benchmark Philippine Stock Exchange index (PSEi) on Friday weakened to 6,331, down 198 points or 3.04 percent week on week.

It was a sea of red most of the week up to the the last trading day, with all counters ending in negative territory.

Average value turnover last week, however, managed to improve to P740 million, up 44.02 percent week on week. Decliners still dominated gainers, 128 to 67.

Last week, scorching hot US inflation – 8.6 percent in May – and the 75-basis-point hike of the US Federal Reserve that followed spooked market investors.

2TradeAsia said the market is bracing for the Bangko Sentral ng Pilipinas’ Monetary Board meeting this week on the heels of the Fed’s 75-basis-point rate increase earlier.

The online stock market research portal said investors would also be keeping a close watch on how the BSP would communicate future policy.

“This as the Fed’s stances has fully digressed from inflation being transitory and instead committed to another 50 to 75-basis-point hike in July – the most hawkish it has been in decades. Our view has always been to embrace rate adjustments in the context of the long-run, that is, to strategize funds around changing risk premiums,” 2TradeAsia said.

2TradeAsia said that entrenched inflation plus wage erosion is expected to broadly hit cyclicals the most.

“Our previous notes have harped on switching from discretionary plays to staples and hedge by increasing exposure to sectors with higher real assets in the balance sheet.”

These sectors are real estate, renewable energy and telco.

“Given this, there may be a case to exploit bruised cyclicals, especially those with the brand equity to pass on the costs or those who are scalable and can afford lower margins in the next six to 12 months,” 2TradeAsia also said.