Local stocks are seen to continue trading with a bearish bias for the fourth straight week this week as investors digest US Federal Reserve Chair Janet Yellen’s “hawkish” speech.
Last week, the Philippine Stock Exchange index (PSEi) slipped by 85.26 points or 0.1 percent to close on Friday at 7,845.49 ahead of the long weekend and Yellen’s speech at the Jackson Hole symposium in Wyoming, a closely watched annual gathering of policymakers. Monday, the market was closed due to the observance of National Heroes Day.
Yellen’s message on Friday was that the case for a US interest rate increase has strengthened in recent months, without providing any hint on the timing, although other Federal Open Market Committee (FOMC) members indicated that a rate adjustment in September was possible.
Apart from US Fed jitters, BDO Unibank chief strategist Jonathan Ravelas said last week’s decline was due to profit-taking and rebalancing of portfolios following the new proposed tax on fatty food and sugar, affecting some food listed firms.
“Chartwise, the week’s close at 7,845.49 is still biased to see the market to test toward the 7,500 levels,” Ravelas said. “However, there could be some bounce but could be limited to the 7,900-7,950 levels.”
“Expect more selling pressure from the index this week, following its breach below 50-day moving average and 7,850 key support,” said Luis Gerardo Limlingan, managing director at Regina Capital Development.
For the first one to two trading days, Limlingan said holding 7,800 would be crucial because a breach would otherwise allow further corrections to 7,770 initially and further to 7,672. Doris Dumlao-Abadilla