Local stock trading seen to remain volatile on continued foreign risks

The local stock market is seen remaining volatile after breaching the psychological 6,800 support level before the market paused for a national holiday Wednesday.

In the first two days of this week, the Philippine Stock Exchange index (PSEi) lost a total of 108.58 points or 1.6 percent to close on Tuesday at 6,781.20.

This week, sluggish trading is seen to continue as foreign funds are forecast to dump shares to protect the value of their investments against a stronger US dollar environment.

After breaching 6,800, the PSEi is next seen testing the gap from 6,731.33 to 6,781.43 this week, local stockbrokerage First Metro Securities said in a research note written by Luis Miguel Zarcal and Bruce Lopez.

“A follow-through rebound from these supports would lead the index to test its resistance zone from the psychological 7,000 level to its previous high at 7,115.76,” First Metro said.

However, the First Metro research noted that the index had yet to show any convincing reversal signals from its downtrend.

“MACD (moving average converge-divergence) readings also indicate a downward bias, while the RSI (relative strength index) continues to trade at near-oversold levels,” the research note said.

Financial markets were closed Wednesday in celebration of Bonifacio Day.

HSBC economist Frederic Neumann earlier said that 2017 would likely be the most difficult for the region since 2009.

“As impressive as the rebound from the local financial crisis has been, Asia has over recent years merely limped along. The taper tantrum of 2013 was a wake-up call, but the region managed to hit the snooze button for a little while longer, avoiding outright financial stress. But growth continued to decelerate, with exports in particular struggling to make meaningful headway since late 2014 and debt saturation weighing on local demand. It’s tempting to think that the latest market gyrations will pass, too, without more substantial harm.