Market jitters weigh on local stocks
Local stocks are seen remaining on shaky ground this week as foreign investors are on a risk-off mode amid escalating US-China tension.
Last week, the Philippine Stock Exchange index (PSEi) shed 158.38 points, or 2 percent, following a disappointing first-quarter Philippine gross domestic product (GDP) growth report and the renewed US-China trade war jitters.
For the past few days, foreigners pulled out more than P1 billion of funds from the local stock market daily.
Jonathan Ravelas, chief strategist at BDO Unibank, said the PSEi had fallen for the second straight week last week on “risk-off” sentiment arising from the escalating trade ware between the United States and China as well the impact of a slower first-quarter Philippine GDP growth of 5.6 percent.
But with the declining inflation trend, Ravelas cited the Bangko Sentral ng Pilipinas’ 200-basis point cut in the reserve requirement ratio on a gradual basis through July. The move followed a 25-basis point cut in the overnight policy rate announced in the previous week.
“This broke the market’s fall, causing some bargain-hunting activities to push market barometer PSEi off the week’s low of 7,475.16,” Ravelas said.
However, he said the week’s close at 7,583.82 signaled that there was some room for further decline to 7,000-7,300 in the near term.
“Any bounce is limited to the 7,800 levels,” he said.
Robert Dan Roces, economist at Security Bank, said the injection of additional liquidity would technically cause the peso to face stronger depreciation pressures.
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