The local stock barometer is seen to consolidate below the 8,000 level this week as investors reassess their portfolio after the recent run-up.
Last week, the Philippine Stock Exchange index (PSEi) hit a high of 8,028.22 but ended the week lower by 108.02 points or 1.35 percent after the US Federal Reserve raised its policy rate.
“The market has been attempting to sustain itself above 8,000 but seems to be having a hard time. Foreign buying has been positive and significant for the past few weeks and will be a factor in the coming sessions,” said Manuel Lisbona, president of PNB Securities.
Foreign investors have been net buyers in the stock market for the last 14 sessions.
“The week could start with a rally but the underlying direction will be sideways for the coming couple of weeks,” Libsona said.
BDO Unibank strategist Jonathan Ravelas said that chart-wise, last week’s close at 7,882.22 continued to suggest that the market would trade between 7,700 and 8,000.
“Look for a break above the 8,000 levels to trigger tests toward the 8,150–8,200 levels,” Ravelas said. Immediate market support will be at 7,650 while resistance is at 8,000, Ravelas said.
Meanwhile, Ravelas noted that the peso had weakened by 0.81 percent last week to 49.90 after the US Fed officials raised its policy rate for the second time this year by 25 basis points alongside additional plans to tighten monetary policy despite growing concerns over weak inflation. “This caused a basket of major and regional currencies to weaken against the greenback,” he said.
“The week’s close at 49.90 continues to signal the currency to range between 49.60 –50 levels,” he said.
Leading online stockbrokerage COL Financial said it was cutting its risk premium assumption on the local market by 60 basis points to 5 percent to factor in potential upside to corporate earnings given an improved global economic outlook and the approval of the Philippine tax reform program by the House of Representatives.
“The outlook of the global economy has improved significantly since we last increased our risk premium assumption in 2015. Growth of developed economies such as the US, Europe and Japan is picking up due to various factors, including fiscal stimulus and cyclical rebound from economic recessions. Coupled with the rebound in China’s economy, the resulting increase in demand for commodities and other imports is, in turn, benefiting developing and emerging economies including the Philippines,” COL said in a research note.