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Investors seen focusing on second-line stocks

/ 05:11 AM July 01, 2019

Local stocks are seen to trade with caution this week as investors await fresh catalysts, possibly from the upcoming local inflation data and the next stream of quarterly earnings reports.

Last week, the main-share Philippine Stock Exchange index (PSEi) shed 55.76 points or .07 percent to close on Friday at 7,999.71. Prior to this, it stayed afloat the 8,000 barrier for seven trading sessions.

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“The local index might kickstart the week with a downward bias in the absence of fresh incentives,” local stockbrokerage Papa Securities said in a research note.

“Focus this week will be on the inflation level for the month of June. A softer inflation than the 3.2 percent posted in May could be viewed as the resumption of the downtrend that will give credence to the full-year estimate of BSP (Bangko Sentral ng Pilipinas). However, a higher inflation might further drag market sentiment,” the brokerage said.

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Papa Securities advised investors to buy on dips, adding that the market might soon get some relief from a possible US Federal Reserve rate cut and the new Congress pushing for the government’s fiscal and economic reforms this July.

Market support is seen at 7,800 and resistance at 8,139.

For the month of June, the PSEi gained by a third of a percent, marking the fourth month in a row that it ended with gains, AAA Equities head of research Christopher Mangun said in his weekly research note.

“If it goes lower, the next major support comes in at 7,880,” Mangun said. “However, I am still convinced that improving economic fundamentals and better corporate earnings will fuel the next rally. With June inflation numbers coming out [this] week, which we are expecting to come in below 3 percent, this could provide some confidence to investors despite what may come out from the G20 meeting this weekend.”

In the meantime, Mangun said retail investors were still expected to trade second-liners and speculative issues this week.

“Investors all over the world are not confident that [US President Donald Trump and China President Xi Jinping] will reach a deal to end the trade war and this anxiety may last for weeks as they figure out what to do and how to position themselves in this market,” Mangun said.

Last week, regional markets were jittery over the G20 Summit and the US Fed monetary stance.

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Meanwhile, Mangun noted that the P11-billion block sale of BDO shares by the Malaysian wealth fund Khazanah, which was purchased by SM last week, distorted foreign fund flows for the week and showed net foreign selling of P7.21 billion.

Last week, he noted brisk trading of second-liners and speculative issues, some of which gained greater attention than the average blue chips. “This tells me retail investors are hungry and are looking for any opportunity to make money in this market. Overall, it is impressive that the market did not end lower despite everything that happened,” he said.

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