Market may still go lower

The local stock market, which is nearing bear territory, is seen to continue trading with caution as investors await this Thursday’s Bangko Sentral ng Pilipinas (BSP) policy meeting and the first quarter Philippine economic growth report.

Last week, the main-share Philippine Stock Exchange index lost another 174.83 points or 2.26 percent to close at 7,546.19. The market has gone down for five consecutive weeks and the index has now declined by 17 percent from the all-time high peak of 9,078.37 in February.

“The 7,500 level has proven to be strong support but based on market sentiment, we will continue to see this market go lower,” said Christopher Mangun, head of research at Eagle Equities Inc.

Mangun said investors were worried about the different economic factors, such as the rise in oil prices which could push inflation even higher. The weakening peso is also a concern, he noted.

This week, Mangun said the index might probe the 7,400 levels or even go as low as 7,350.

“We need to see an increase in volume for this market to start recovering,” he said.

On Thursday, the BSP is set to discuss monetary policy settings. While many analysts have long been calling for an interest rate hike to curb rising inflation, Mangun said a rate increase might be counterproductive given “cost-push” inflation from increased taxes and increasing oil prices.

“The government has done a good job by not increasing rates as this would only increase the cost of money,” he said.

Jonathan Ravelas, chief strategist at BDO Unibank, said investors remained sidelined ahead of the release of key economic data this week.

On the first quarter Philippine gross domestic product (GDP) data, the market is expecting a growth of 6.8 percent year-on-year compared to the revised 6.5-percent expansion in the fourth quarter. The consensus also points to a 25-basis point hike in the BSP’s overnight rate on the same day that the GDP report is released (May 10).

“Chartwise, the week’s close at 7,546.19 highlights near-term support emerged at the 7,500 levels. Should this level hold, expect a retest of the 7,800 levels in the near term. However, failure for the market to hold above the 7,500 levels will call for further losses toward the 7,000 to 7,200 levels,” Ravelas said.

Support and resistance levels are seen by Ravelas at 7,500 and 8,000 levels, respectively.