THE LOCAL stock market is seen to remain jittery this week due to external volatility arising from expectations of higher US interest rates and China’s economic slowdown.
Last week, the main-share Philippine Stock Exchange index (PSEi) ended 47.03 points or 0.66 percent lower to close at 7,051.78 on Friday.
Joseph Roxas, president of Eagle Equities Inc., said the market would likely open on a sluggish note this week given the weak backdrop from Wall Street on Friday.
The closely watched Dow Jones industrial index slumped by 272.38 points or 1.66 percent to 16,102.38 on Friday. This was after the latest US payrolls report showed that 173,000 new jobs had been created in August—less than consensus forecast—while the unemployment rate had gone down to 5.1 percent, the lowest since April 2008.
This was the last US economic report awaited before the Sept. 16 to 17 meeting of the US Federal Reserve and the mixed bag of labor data only created more uncertainties on whether the US central bank would start raising interest rates this September as most investors had expected prior to the global stock meltdown triggered by China’s economic woes.
“For this week, we need the index to stay above 6,950 in order to establish a bullish
higher low base and have a better chance of breaking 7,110. Doing so will put prices in a short-term upswing and ultimately retest its breakdown point at 7,272,” said Luis Gerardo Limlingan, managing director at Regina Capital Development.
But Limlingan noted that meeting these conditions would not necessarily reverse the index’s primary downtrend as hitting 7,272 would still be a lower high compared to July’s highs. “Therefore we expect a lot of selling pressure near this resistance,” he said.
On the other hand, Limlingan said failure to hold 6,950 could trigger a pullback as deep as 61.8 percent toward 6,636 and put signals back to the bearish territory. As such, Limlingan said investors must be cautious on issues trading above their 200-day and 260-day moving averages and prepare to sell on rallies on those below these averages.
Jonathan Ravelas, chief strategist at Banco de Oro Unibank, said that for this week, the market would likely continue testing the 6,900 to 7,200 range. Doris Dumlao-Abadilla