Bargain-hunting seen lifting Stocks this week

The local stock market is seen to find some respite this week after staying in the doldrums for four consecutive weeks.

Last week, the main-share Philippine Stock Exchange index (PSEi) fell by 129.88 points or 1.44 percent to close on Friday at 7,276.82.

“Despite the sharp drop these past weeks, the market is quite oversold and is ripe for a technical rebound to retry the 7,500 to 7,800 levels,” BDO Unibank chief strategist Jonathan Ravelas said in a research note. “It seems that the bearish sentiment is still evident and the market is having much difficulty in sustaining any rally above 7,350 levels.”

In the near term, Ravelas said bearish sentiment may put to test the support levels at 7,000 to 7200.

Last week, Ravelas noted that the biggest concern for the market was that inflation might rise further due to crop damage caused by Typhoon “Ompong,” compounding the weakening peso and rising oil prices. However, he noted that some bargain-hunting activities toward the end of the trading week helped the market to bounce off the lows.

On the exchange rate, Ravelas said he expected the peso to trade this week in a range of 53.90 to 54.10 against the dollar.

Christopher Mangun, head of research at Eagle Equities Inc., noted that foreign funds continued to exit at a steady rate with net foreign selling last week at P1.75 billion.

“This is the fourth week in a row that the index ended in the red, which has brought prices back down to more attractive levels. Based on the technicals, there is indication that the selling is exhausted and we may see the index end in the green [this] week,” Mangun said.

Mangun said more investors might go back to the market this week as the 50-basis point interest rate hike sanctioned by the Bangko Sentral ng Pilipinas last week should be a positive sign that the government was addressing inflation pressures.

“The optimum situation is that the index holds support at 7,200 to confirm the bottom at around 7,000 that we saw back in July. If it breaks below the 7,200 line, then we may see it test 7,000 again soon,” Mangun said.