Stocks seen to remain volatile

Philippine stocks will remain volatile this week with a “bearish” near-term outlook due to negative sentiments overseas.

Stock brokerage firm AB Capital Securities Inc. noted that while there were positive signs locally—with money from workers abroad continuing to flow in (it grew by about 7.2 percent to $2.2 billion in August)—it nevertheless advised investors to exercise caution.

Last week, the Philippine Stock Exchange index fell by 2.29 percent to 7,003.22 as investors cut their holdings following lower global growth expectations.

“Market volatility remains high with foreign inflows and outflows dictating the pace of the market,” AB Capital said in its weekly report. “The 2.78-percent decline last Monday formed a breach in the 4-month trend line support, resulting in a bearish near-term outlook.”

It said the PSEi would need to close above 7,200 to reverse the current trend.

AB Capital pegged support levels at 7,000 and 6,950, while resistance levels are at 7,100 and 7,200.

This was similar to projections made by Jonathan Ravelas, chief market strategist at BDO Unibank Inc., who pegged the range at 6,900 to 7,200, a post on his twitter account showed on Friday.

According to data coming out of Europe, Germany had already cut its growth forecast after industrial production slowed. However, more positive signs came out of the United States Federal Reserve Bank, AB Capital noted.

“Suggestions from Federal Reserve Bank of St. Louis President James Bullard to extend the quantitative easing program caused US equities to reverse its losses,” AB Capital said. “The comments of Bullard caused positive sentiment among investors that the economic stimulus and low rates are here to stay.”

AB Capital said investors, at the right levels, should exercise discretion when considering sectors like gaming, power, banking and consumer. Miguel R. Camus