PSEi seen attempting to breach 7,800 this week

Local stocks are seen attempting to breach the 7,800 level this shortened trading week as investors digest US Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole conference.

Trading will resume Aug. 28 as today is a non-working holiday in observance of National Heroes Day.

Last week, the Philippine Stock Exchange index (PSEi) gained 2.41 percent to close on Friday at 7,766.47 but there was profit-taking on Friday ahead of Powell’s address.

On Friday, US stocks surged after Powell affirmed the central bank’s stance on “gradual” interest rate increases. He saw “no clear sign” that US inflation was accelerating above 2 percent.

The Dow Jones industrial average gained 0.52 percent to close at 25,790.35 on Friday.

“Chart-wise, the week’s close at 7,766.47 highlights strong support exists at the 7,500 levels. If buying support continues, expect another attempt at 7,800 levels,” BDO Unibank chief strategist Jonathan Ravelas said. “However, a break below the 7,500 levels could call for further losses toward the 7,000 levels.

Christopher Mangun, head of research at Eagle Equities Inc., noted that last week’s rise was caused by an increase of money flow into the local market, benefiting mostly blue chip stocks.

“Foreign funds continue to exit emerging markets with net-foreign selling at P493 million, which is way below the average outflow. This tells me that foreign investors are still weighing the pros and cons of investing in our market as the fundamentals of our economy remain intact,” Mangun said.

But while the local market performed very well last week—thanks to increased traded value and huge gains of the San Miguel companies ahead of the share sale of San Miguel Food and Beverage—Mangun said the local market was “not in the clear yet.”

In recent days, the PSEi has found it difficult to stay above the 7,800 mark.

“If it can break above this level [this] week then there is no doubt that the index will go back to 8,000 with ease. However, there are only four trading days [this] week and we may see lower volumes. If this happens, then we may see it trade sideways or come back down to support at 7,600,” Mangun said.