Local stocks are seen trading with a bearish bias this week as global markets weigh the coronavirus (COVID-19) contagion.
Last week, the main-share Philippine Stock Exchange index (PSEi) slid by 7.9 percent week-on-week to close on Friday at 6,787.91 on escalating COVID-19 fears across global markets.
Local equities are now trading at their lowest levels since December 2016.
The index has also fallen by 25 percent from its record high of 9,058, placing it in bear territory. Last week, it breached a critical support level and the October 2018 low of 6,790.
BDO Unibank chief strategist Jonathan Ravelas said investor confidence was severely affected by fear, causing them to sell their riskier assets, in this case equities.
“The week’s close at 6,787.91 highlights the bear momentum remains,” Ravelas said.
“Continue to see the market to trade sideways to down. Support lies at the 6,700 levels,” he added.
One key local macroeconomic report awaited this week is the February inflation report.
UnionBank economist Ruben Carlo Asuncion said the country’s February 2020 inflation might have eased to 2.8 percent from 2.9 percent year-on-year in January as the impact of Taal Volcano’s eruption has eased.
“Taal Volcano’s alert level was downgraded to ‘3’ last Jan. 26, and with it is the dissipation of the upward pressure on food and produce prices as supplies were expected to have tightened momentarily,” Asuncion said.
Furthermore, Asuncion said the issue among members of the Organization of Petroleum Exporting Countries (Opec) on the agreement to cut supplies and the impact of the COVID-19 outbreak on China’s oil demand might have caused a distinct downward pressure on annual increments of price levels in the economy.
Robert Dan Roces, economist at Security Bank, projected the February year-on-year inflation at 3 percent, with a forecast range of 2.9 to 3.1 percent. He estimated month-on-month inflation at 0.2 percent.