Oct 022016

After a roller coaster ride last week, the local stock market is expected to trade sideways this week, analysts said.  

MANILA, Philippines – After a roller coaster ride last week, the local stock market is expected to trade sideways this week, analysts said. 

But recovery may come sooner than later following a low base, they said. 

The benchmark Philippine Stock Exchange index (PSEi), may reach 7,530 to 7,790.

“We expect the PSEi to trade sideways for the week, with slight bias on the upside due to the recently formed higher low base at 7,550 to 7,530 and its improved direction and momentum readings for the  last three weeks,” said Luis Limlingan, managing director at Regina Capital.

At the same time, he cautioned that this does not mean the index may be on its way to establishing an uptrend given the highly volatile environment.

Thus, Limlingan said, it is important to keep positions light. 

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“To handle this volatility, a quick range trade strategy is recommended especially for issues that have a defined swing pattern. We are particularly cautious of trending issues — either up or down — because they can contain the most volatility which makes them very vulnerable to sudden spikes,” he said. 

“We are setting this week’s trading range at 7,530 to 7,790, a breach of either level will trigger a major reversal,” he also said. 

Jonathan Ravelas, chief market strategist at Banco de Oro said the week’s close at 7,629.73 continues to support further test toward the 7,200 to 7,500 levels. 

“Only a move above the 7,850 could entertain a reversal is in place,” Ravelas said.

Last week, the PSEi lost 1.22 percent week-on-week to close at 7,629.73 as investors remained on the sideline in anticipation of a possible US Federal Reserve rate hike toward the end of the year. 

The index also saw P1.04 billion in net foreign selling last week. 

Since Aug. 15 to Sept. 30, cumulative net foreign selling has reached P24.5 billion.

Among the sectors, the services sector showed the highest losses last week, while the mining and oil sector seemed to be largely untouched by the completed Department of Environment and Natural Resources mining audit which saw 20 mines recommended for suspension in addition to the seven already named by the government agency, said Victor Felix, analyst at AB Capital. 

Felix said the Philippine peso is now starting to show the negative impact of President Duterte’s headline grabbing rhetoric, having reached a seven-year low of past the P48 level.

“Compounding to the issue of political noise with President Duterte’s headline-grabbing rhetoric, the S&P ratings agency reported that a credit rating upgrading is unlikely in the future, while the Philippines slipped 10 notches to 57th place in the World Economic Forum’s Global Competitiveness list,” Felix said.

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