Stocks seen sinking deeper into bear territory

The local stock market is seen to probe deeper into bear territory this week as global markets brace for potential economic fallout from the coronavirus contagion.

Last week, the Philippine Stock Exchange index (PSEi) tumbled by 5.54 percent to close on Friday at 7,200.79 as the coronavirus epidemic added to jitters about local regulatory risks.

The local stock barometer has now declined by more than 20 percent from the record finish of 9,058.62 on Jan. 29, 2018. To confirm a reversal of the 11-year bull cycle, the index must stay within the bear zone, or below 7,250, for two to three months.

The bloodbath in Wall Street on Friday is seen further driving risk aversion. The Dow Jones industrial average tumbled by 603.41 points or 2.09 percent.

“I think the market may continue its bearish steak, worsened by the significant downturn in the US market [on Friday] night. Foreign selling on Friday was dramatically larger than the previous days, which to me indicates an accelerating exodus from the market,” said Manuel Lisbona, president of PNB Securities.

Lisbona said some psychological support could be found at 7,000 but there were a couple of gaps that the index might try to fill given the bearish trend: 6,971 (Nov. 15, 2018), 6,658 (Dec. 27, 2016) and 6,563 (Dec. 23, 2016).

BDO Unibank chief strategist Jonathan Ravelas said “risk aversion is contagious and coronavirus has infected investor confidence.”

“The week’s close at 7,200.79 highlights the move toward the 7,000 levels is underway. Any pullback could be limited toward the 7,700 levels,” he said.

Beyond the coronavirus contagion, Eagle Equities Inc. president Joseph Roxas said the bigger concern for foreign investors was the perception on how sanctity of contracts was not being protected in the Philippines.

Roxas said the PSEi might soon retest the 2018 low of 6,800. —DORIS DUMLAO-ABADILLA INQ