Local stocks are seen trading with more optimism this week as some foreign flows seem to be trickling back to the market while the main index has found the 7,500 level to be a reliable support level.
Last week, the Philippine Stock Exchange index (PSEi) racked up 205.92 points or 2.73 percent to close on Friday at 7,752.11, gaining for the first time in five weeks.
The 2.39-percent rally on Friday was mostly attributed to the Bangko Sentral ng Pilipinas’ much-awaited decision to raise interest rates, in turn allaying concerns on inflation. On the other hand, the country’s 6.8-percent gross domestic product (GDP) growth came in within expectations.
BDO Unibank chief strategist Jonathan Ravelas said the GDP report last week highlighted the year-on-year growth in investments of 12.5 percent and in government spending of 13.6 percent, which more than offset the slowdown in consumption spending to 5.6 percent. He noted that net trade, meanwhile, continued to drag GDP despite a moderation in import growth of 9.3 percent year-on-year, as export growth plummeted to 6.2 percent.
“Chartwise, the week’s close at 7,752.11 highlights strong buying support emerged at the 7,500 levels,” Ravelas said. “Expect a retest of the 8,000 levels in the near-term.”
Christopher Mangun, head of research at Eagle Equities Inc., said the PSEi’s ability to stay above 7,500 was cementing this level as a strong support.
“Despite having only four days of trading [this] week due to the barangay elections, we are seeing a lot of optimism as the index refuses to break below this 7,500 support level,” Mangun said.
The stock market will resume trading on Tuesday (May 15) after the barangay elections on Monday.
“There is strong indication that the index has finally found a bottom at 7,500. My biggest concern, however, is still the lack of trading value. A big positive is the heavy inflow of funds into the blue-chips. Most of Friday’s gains came because of the lack of sellers, which allowed buyers to push prices up on very little volume,” Mangun said.
“If we continue to see buying pressure (this) week, then we may see the index test its next resistance at 7,830. There is also the possibility that the index will continue to consolidate between 8,500 and 8,700 as it builds momentum to test the next resistance,” he added.