LOCAL stocks are seen to remain in the doldrums this week as investors brace for a potential increase in US interest rates as early as next month.
Last week, the Philippine Stock Exchange index (PSEi) slipped by 0.23 percent to close at 7,118.20 on Friday as fresh jitters on the US Federal Reserve’s interest rate liftoff intensified.
It was reported last Friday that the US economy added 271,000 jobs in October, beating consensus forecasts. This further boosted expectations that the liftoff will happen in December. Last week, US Fed Chair Janet Yellen also commented that a December rate hike was possible.
Following the employment report, Citigroup said it would take a “bunker-buster” offset to deter the Fed from raising rates in December. “This sounds like September all over again. And all it took then was the markets to react badly to events in China,” Citi said in a research note on Saturday. “Were they not apparently so fickle, we would change our Fed call right now to a December hike. But the recent actions of the FOMC (Federal Open Market Committee) imply it is possible sentiment may switch even from current lofty levels of near-certainty about December.”
At the same time, investors continue to monitor the third-quarter local corporate earnings reporting season. Many of the country’s blue chips are scheduled to release their latest earnings results this week.
Local stockbrokerage AB Capital Securities said that for this week, a breach of support levels would pave the way for further downside to 7,000. It noted that other technical indicators remained “neutral-bearish.”
AB Capital Securities pegged the support level at 7,070 while the initial and secondary resistance levels can be found at 7,200 and 7,400, respectively.
Jonathan Ravelas, chief strategist at Banco de Oro Unibank, said the index consolidated within the 7,000-7,300 range last week but was unable to sustain gains above 7,200 as investors weighed mixed corporate earnings results and the higher probability of a December US Fed rate liftoff.
“Chartwise, the week’s close at 7,118.20 continues to support further weakness toward the 6,900-7,000 levels in the near term,” he said.
On the currency market, Ravelas said the peso might retest the 47 levels against the dollar this week. Doris Dumlao-Abadilla