Sluggish trading seen

Local stocks are seen to continue treading shaky ground this week as risk-taking remains sluggish.

Last week, the main-share Philippine Stock Exchange index (PSEi) fell by 2.19 percent to close on Friday at 7,726.72.

BDO Unibank chief strategist Jonathan Ravelas said growing concerns over a weak peso and the rising inflation were putting a squeeze on consumer spending, causing foreign investors to sell over $51.18 million worth of shares last week, the biggest outflow seen in four weeks.

The benchmark touched a new 11-month low of 7,537.42 on Thursday last week.

“The week’s close at 7,726.72 highlights near-term support at 7,500 to 7,550 levels. Expect the index to retest the 8,000 levels. However, the market is still vulnerable toward the 7,000 to 7,200 levels,” Ravelas said.

Ravelas sees immediate support and resistance levels at 7,500 and 8,000, respectively.

Christopher Mangun, head of research at Eagle Equities Inc., said while the PSEi had broken below the congestion area between 7,900 and 8,100, it held the next major support at 7,700 after coming down to 7,537.42 on Thursday due to heavy outflow of foreign funds.
“Nonetheless, in two out of the five days, we saw foreign funds flow in,” Mangun said.
“This tells me that foreign investors are testing the waters and are starting to get in at the current levels,” he said.

Investors continue to favor small and mid-cap companies as we they wait for the index to find a bottom, Mangun said.

Two scenarios are possible this week, Mangun said.

“First is that the index trades within a 100-point range between 7,600 and 7,750… as the market calms down and consolidates at this area,” Mangun said.

“The second is it loses another 200 points to test the next support at 7,500. If this happens, we will see volume/value turnover pick up,” he said.