Local stocks are seen trading with caution in the next few weeks as global funds continue to favor developed markets at the expense of emerging markets like the Philippines.
This week, the main-share Philippine Stock Exchange index (PSEi) fell by 129.72 points or 1.9 percent to close at 6,404.23 on Thursday. Local markets were closed Friday in observance of the end of Ramadan.
Thursday’s close implied further tests toward the 6,350 levels, said Banco de Oro Unibank chief strategist Jonathan Ravelas. “If broken, we could see further losses toward the 5,800 to 6,000,” he said.
Global volatility and adjustments being made in the equity and currency markets would have some dampening effect on the Philippine market, Citisec Online chief technical analyst Juan Barredo said in a research note.
“There may yet be a need for prices to simmer down as the index still shows technical weakness, perhaps looking between 6,300 and 6,100 for next support,” Barredo said.
“Mining, financials and property stocks seem to be sectors under greater weakness and may continue to show this into the next couple of months. It is hoped that such reactive swings bring prices back to much better valuations and draw out fresh windows of trading opportunity closer to the fourth quarter,” Barredo said.
The expected consolidation low and high ranges of the PSEi into the rest of the year would be between 5,800-6,100 and 6,800-7,100, Barredo said.
Markus Rosgen, head of Citigroup’s Asia-Pacific equity strategy, said in the week ending Aug. 8, bond funds saw a second week of global outflow at $2.2 billion while an inflow of $6.9 billion went into equity funds.
“US funds continued to have the largest inflow at $5.8 billion, while European funds also saw some $1.8 billion of inflow,” he said, adding that most of the outflows came from emerging markets of Asia. Foreigners sold $226 million of Asian equities last week, mostly out of Taiwan and Thailand while India and Indonesia saw net purchases of $230 million each. Doris C. Dumlao