As jitters ease, hike in stock prices seen

The local stock market is seen sustaining its rebound this week as local inflation jitters have eased for now.

Last week, the Philippine Stock Exchange index (PSEi) recouped 114.52 points or 1.64 percent to close on Friday at 7,083.34.

BDO Unibank chief strategist Jonathan Ravelas said local investor sentiment improved last week following the drop in global oil prices and the improvement in emerging market currencies driven by the slight weakening of the greenback.

For the sixth straight week, the peso firmed up against the US dollar, closing on Friday at P52.715:$1 after the Bangko Sentral ng Pilipinas raised its key interest rates by another quarter-percentage point to curb inflation.

Favorable news on overseas remittance flows also helped perk up the local currency.
The peso’s recovery against the greenback in turn further strengthened the view that inflation could have peaked, causing investors to rush back into the market, Ravelas said.

“Chartwise, the week’s close at 7,083.34 indicates that strong support exists at the 6,800 to 6,900 levels,” Ravelas said.

“Look for an attempt toward the 7,300 levels in the near term,” he added.

The market performed well last week despite an increase in foreign fund outflows amounting to P2.86 billion, said Christopher Mangun, head of research at Eagle Equities Inc.

He noted that several blue-chip companies were up by more than 5 percent last week, causing the main index to rise almost twice faster than the broader all-share index.

The three local banking giants BDO, BPI and Metrobank helped perk up the index last week after reporting improved third quarter earnings.

“Despite the PSEi closing at its lowest level in 2018 this week, it has managed to stay within its congestion area between 6,800 and 7,100. Based on the increase in trading volume and the pick-up in trading of blue chips, this market is positioning itself to start going up,” Mangun said.

Mangun sees the next major resistance at 7,200, after which the next target will be 7,500. This is the level at which the market could be by the end of the year, he said. —DORIS DUMLAO-ABADILLA