Local stocks seen staying out of bear zone

The local stock barometer is seen attempting to stay out of the bear zone this week as investors pick up battered stocks amid a recent spurt of foreign inflows.

Last week, the main-share Philippine Stock Exchange index (PSEi) rallied by 4.26 percent week-on-week to close on Friday at 7,507.20.

BDO Unibank chief strategist Jonathan Ravelas said investors took advantage of the previous week’s losses to “accumulate stocks in line with global markets on resilience play amid virus concerns.”

“The week’s close at 7,507.20 highlights continued bargain-hunting activities in the near term and may retry the 7,700 to 7,800 levels. Failure to clear these levels could reignite the bear trades anew,” he said.

At 7,250, the PSEi would have declined by 20 percent from its peak in 2018.

In the last three years, however, the market has recovered but some analysts believe that the bounce was driven more by selling exhaustion rather than renewed buying appetite.

Local stockbrokerage Papa Securities said the novel coronavirus (nCoV) issue remained an overhang.

Papa Securities is anticipating the announcement of the February 2020 PSEi rebalancing. The brokerage expects a major upweight for SM Prime Holdings (+1.1 percent in weight), especially with the free float getting a boost from 32 percent to 36 percent.

The biggest downweights to the PSEi might come from SM (-0.5 percent in weight) and BDO (-0.2 percent in weight), citing minimal float changes, the research note said.

Meanwhile, the Bangko Sentral ng Pilipinas cut its overnight policy rates by 25 basis points last week, seen as a preemptive move to cushion the impact of the nCoV contagion.

“Improved liquidity levels and loan growth also provided a catalyst for the BSP to unwind from the 2018 rate hikes, with the cut providing a nudge to counter a slowdown from the virus,” Security Bank economist Robert Dan Roces said in a research note.

Security Bank expects the Philippine gross domestic product to grow by at least 6 percent to as high as 6.2 percent, depending on how long the contagion will last. The bank sees full-year economic growth for the country at 6.3 percent. INQ