Another week of sluggish trading is seen in the local stock market as investors await the final stream of local corporate earnings and closely track US-China dynamics.
Last week, the main-share Philippine Stock Exchange index (PSEi) shed 3.39 percent to close on Friday at 7,854.39, declining for the third straight week.
BDO Unibank chief strategist Jonathan Ravelas said risk-off trades have risen from the trade war escalation between the US and China as the latter allowed its currency to weaken past the 7 -to-a-US dollar threshold.
“The week’s close at 7,854.39 continues to signal the market to consolidate within the 7,800 to 8,000 levels in the near term,” Ravelas said. However, downside risk remains toward the 7,500 levels.”
Last week, the Philippines reported a disappointing second-quarter gross domestic product (GDP) growth rate of 5.5 percent. In the same day that the GDP numbers came out, the Bangko Sentral ng Pilipinas slashed its overnight borrowing rates by 25 basis points.
“The worst may be behind the Philippine economy coming into the second half, yet stronger external headwinds such as the protracted US-China trade war, the resulting downside risks to investments and inflation set to fall further, gives scope for another 25-basis point cut by yearend to support and sustain growth coming into 2020,” Security Bank economist Dan Roces said.
“Thus, we expect full year GDP growth to be at or slightly above 6 percent. A data-dependent BSP will definitely take stock of its pro-growth stance and consider augmenting with a reserve requirement ratio cut sooner,” he said.
Meanwhile, the PSE announced that the 30-member Philippine Stock Exchange index (PSEi) would remain unchanged based on its regular index composition review covering the trading period July 2018 to June 2019.
“Our periodic review of the PSEi ensures that the index members continue to be the top companies among those that meet the Exchange’s standards on free float level, liquidity and market capitalization. This exercise gives us the most suitable representatives of the Philippine stock market’s main barometer,” PSE president Ramon Monzon said.
The composition of four sector indices—financials, holding firms, services and mining and oil—will also stay intact. One company, Phinma Energy Corp., will be added to the industrial index. The property index, on the other hand, will see the addition of D.M. Wenceslao and Associates Inc. and Sta. Lucia Land Inc. and the removal of Philippine Realty Holdings Corp.
In order to be included in the sector indices, the common stocks of a company must meet the float requirement of 15 percent and rank among the top 50 percent in terms of median daily trade a month in eight out of the 12-month period in review. No market capitalization ranking is required.
The changes in the indices will be implemented on Aug. 19.