Main stock index seen staying below 8,000

The local stock barometer is seen consolidating below the 8,000 mark this week as investors seek fresh market leads.

Last week, the main-share Philippine Stock Exchange index (PSEi) gained a modest 28.99 points or 0.3 percent to close on Friday at 7,843.16.

BDO Unibank chief strategist Jonathan Ravelas said the PSEi remained range bound last week as investors stayed on the sidelines to wait for fresh new leads on the economy.

“Chartwise, the week’s close at 7,843.16 still suggests the market to range between 7,700– 8,000 levels,” Ravelas said.

Meanwhile, investors were also spooked by the depreciation of the peso, which weakened by another 0.5 percent last week to P50.47 against the dollar.

Ravelas said the peso’s depreciation was due to the hawkish signal by the US Federal Reserve alongside quarter-end corporate demand.

“The week’s close at 50.47 highlights the dollar bulls are in control,” Ravelas said, adding this put the 51–51.50 levels within striking distance.

Ravelas sees the peso trading range this week between 50.30-50.60 levels.

Luis Gerardo Limlingan, managing director at Regina Capital Development, said last week’s selldown witnessed the breach of both the 20-day and 50-day moving average, “where the next likely support is now grounded at 7,679 if the selling pressure won’t ease up.”

“Meanwhile, indicators are also not as positive with the situation: RSI (relative strength index) finally slid toward selling regions, MACD (moving average convergence divergence) recently crossed with the signal line and histogram is increasing, while selling pressure in DMI (directional movement index) already outrun its buying counterpart on a consistently increasing momentum,” he said.

In global markets, Citi said that after a hawkish outturn of the last Federal Open Market Committee (FOMC), attention would focus on discussion around recent inflation weakness and plans for policy normalization, including the timing for balance sheet reduction.

Investors are also seen to wait for the upcoming US jobs and manufacturing data.

US Fed speakers this week include FOMC voters vice chair Stanley Fischer and Jerome Powell (Thursday) and non-voter James Bullard (Monday).

Citi also noted that in Europe G20 leaders would be meeting in Hamburg where Chancellor Angela Merkel has promised to discuss the Paris Accord and free trade, while President Donald Trump would be meeting with President Vladimir Putin. The minutes from the June European Central Bank meeting will also be released. —DORIS DUMLAO-ABADILLA