Experts see market weakness

THE LOCAL stock market is seen to trade with a bearish bias this week in the absence of fresh catalysts in the aftermath of the second quarter corporate earnings reporting season.

Last week, the Philippine Stock Exchange index shed 22.06 points or 0.3 percent to close at 7,930.75 on Friday.  The market was hardly perked by the better than expected

7-percent Philippines economic growth rate in the second quarter, which exceeded market consensus of 6.6 percent.

“Chart wise, the week’s close below the 7,960 levels signals further weakness toward the 7,500–7,800 levels in the near-term,” said Jonathan Ravelas, chief strategist at BDO Unibank.

Ravelas said investors across the globe had renewed focus on the US Federal Reserve, which would meet this week.

Ahead of this meeting, emerging market stocks have pared gains, he said.

Luis Gerardo Limlingan, managing director at Regina Capital, said the PSEi might continue moving sideways this week, with a narrower trading range of between 8,030 and 7,900.

“Last week’s bearish trend bias is also expected to start shifting slowly on the neutral side, making a range trade strategy more appropriate this week. However, a cautious trading approach is still advised as some directional indicators remain bearish, albeit rather weak in terms of price momentum,” Limlingan said.

Over the next three months, Limlingan said the PSEi might still see significant pullbacks toward the 50- and 65-day moving averages at 7,850 to 7,770, noting that prolonged consolidation near the highs increased the risk of volatile corrections in case of reversals.

“Issues trading near/at weekly support points are good buys for the week. Caution is advised for issues still trading at highs due to heightened corrective risk,” Limlingan said.

This week, AB Capital Securities said among the data to watch out for would be the US June unemployment claims and preliminary second quarter GDP data alongside US Fed Chair Janet Yellen’s speech on Friday, which might provide a clearer picture on whether the Fed would raise rates next month.

“For the technical aspect of the PSEi, a breach below the uptrend channel’s trough line may signify weakness on risk-taking of trades for index issues. Thus, we may see more activity in second-liners as well as speculative issues in the ticker tape, as overall bullish signals remain subdued,” AB Capital said.

Due to the lack of any upcoming positive news, AB Capital said the PSEi might trade lower to the secondary support of 7,700.

“Otherwise, we may see a rebound at the immediate support at 7,840 and trade back in the 7,900-8100 range,” AB Capital said.

At present, AB Capital said the market’s relative strength index (RSI)—a technical indicator—indicated a bearish momentum.

“Overall, we remain bullish for the year as we still see August as a month of correction. Further, we believe that a technical sell-down to the 7,660 area would be a healthy rebound area,” the brokerage house said. Doris Dumlao-Abadilla