The local stock barometer is seen trading with an upward bias this week as investors bet on dovish central banks here and abroad.
Last week, the Philippine Stock Exchange index (PSEi) gained a total of 118.23 points, or 1.5 percent, to close on Friday at 8,117.94, its best finish since closing at 8,144.16 on Feb. 1 this year.
Last week’s ascent to the 8,000 was fueled by expectations the central bank would further reduce its policy rates in the coming months after a better-than-expected June inflation print, BDO Unibank chief strategist Jonathan Ravelas said.
“Anticipation of better first half earnings fueled by lower inflation and lower interest rates also helped push the market above the 8,000 levels,” he said.
“The week’s close at 8,117.94 [showed that] momentum is building up to challenge the 8,100 to 8,200 levels. A break above 8,200 could signal a breakout of the 7,500 to 8,000 levels consolidation and engage the bulls back to play,” Ravelas said.
On the other hand, Ravelas said the PSEi’s failure to sustain gain above 8,000 could signal further consolidation within the 7,900 to 8,100 levels.
Christopher Mangun, head of research at AAA Equities, said the PSEi might finally have a shot at breaking the heavy resistance at 8,150.
“This was the level that it hit at the beginning of the year, right before it lost 500 points and came all the way down to 7,600,” Mangun said.
“Trading last week was extremely boring but nonetheless, this may be the calm before the storm. If it can successfully break above that resistance level, then we may see it back at all-time highs before the end of the year. This scenario may play out over the next few weeks,” he said.
But if the PSEi would fail to rally past 8,150, Mangun said the index might lose another 500-600 points and trade sideways till the end of the year.
“I am more inclined to believe that the former scenario is what will play out,” he said, adding that this would be a very interesting week for investors.
Meanwhile, Mangun noted that US government bonds were at multiyear lows last week on expectations that the Federal Reserve would cut interest rates this month and other central banks would follow suit, sending US equities to new all-time highs.
Overall, the main index went up by 7 percent in the first half of the year, which Mangun said was a normal snapback after the very dismal performance last year.
“And I am looking forward to the next six months, with extreme optimism as economic fundamentals get better and corporate growth picks up, there is no reason for Philippine equities not to go higher,” he said.