Stock outlook remains gloomy

Stock market sentiment is seen to remain gloomy this week as a string of local and overseas concerns curb risk-taking activities.

Battered by 32 straight days of net foreign outflows, the main barometer Philippine Stock Exchange index (PSEi) slipped for the sixth straight week last week, losing 73.43 points, or 1.04 percent to close at 7,004.77.

The PSEi has now reversed by 2,073.6 points, or 22.8 percent after hitting a record peak of 9,078.37 on Jan. 29.

BDO Unibank chief strategist Jonathan Ravelas said inflation concerns, amid the weakening peso and rising oil prices, continued to drag down the market alongside last week’s sell-off in Wall Street.

US stocks mostly rebounded on Friday but still ended with the worst week since March.

Last week, the PSEi hit a low of 6,790.58, a level not seen in the past 21 months. Net foreign selling for the week amounted to P2.62 billion.

“Chartwise, the week’s close at 7,004.77 highlights there is still room for the market to try the 6,500 levels given it just sliced through the 6,900 to 7,000 levels,” Ravelas said.

“Expect some bargain hunting at those levels but could be limited toward the 7,100 to 7,300 levels,” he said.

After 6,500, he said the next key support level for the market would be at 6,000.

“Overall, our market performed better than the rest of the global markets despite low trading volumes and heavy foreign outflows. It could be because of the fact that western markets are coming off recent highs while our market has been taking a beating for most of the year. It is impressive that the index closed above the 7,000 support level but we are not out of the woods yet,” said Eagle Equities head of research Christopher Mangun.

Mangun noted that local investors were doing their best to support the market.

“However, the bottom line is that we will not see any significant gains in this market until we see foreign outflows slow down. Going into [this] week, we are looking at two scenarios. The index may move sideways and stay above the 7,000 level or it could tank and test the next support level at 6,800. Based on market sentiment, there is a stronger possibility of the latter scenario,” he said.

He said majority of investors would continue to stay on the sidelines while foreigners were dumping local stocks, resulting in lower trading volumes.

“Investors still in this market will continue to buy blue-chips that were laggards last year like Gokongwei and Aboitiz companies. Major telco companies PLDT and Globe Telecom have also performed well in the last few months, which could be attributed to the delay in the implementation of the third telco. Opportunities in second-liners will also be more attractive,” he said.

The Duterte administration is moving to allow a third major telco player to break the duopoly of PLDT and Globe, whose services have been criticized by consumers.