Local stocks are seen trading with a limited upside this week on escalating fears over the coronavirus (COVID-19) contagion on the local as well as the global economy.
Last week, the main-share Philippine Stock Exchange index (PSEi) shed 0.26 percent to close on Friday at 6,770.38.
BDO Unibank chief strategist Jonathan Ravelas said investor confidence was severely affected by the COVID-19 contagion, causing them to sell their equity assets during the rallies.
He noted that the Philippines announced three additional confirmed cases of COVID-19 infection, bringing the tally to six .
“The week’s close at 6,770.38 highlights the bargain-hunting activities may be slowing down despite cheap valuation,” Ravelas said.
“Expect another try at the 6,800 to 6,900 levels. Failure to sustain the rally could revisit the lows anew,” he added.
The PSEi’s support is seen at the 6,700 levels, which represents the 52-week low.
With the COVID-19 contagion now reaching more than 60 countries, the World Bank Group announced last week an initial package of up to $12 billion in immediate support to assist countries coping with the health and economic impacts of the global outbreak. This financing is designed to help member-countries take effective action to respond to and, where possible, lessen the tragic impacts posed by the virus.
In the Philippines, further monetary easing is expected especially after the US Federal Reserve’s surprise 50-basis point rate cut last week.
Robert Dan Roces, economist at Security Bank, said the Bangko Sentral ng Pilipinas (BSP) could cut its overnight borrowing rate by 25 basis points during the March 19 meeting of its policy-making Monetary Board.
Bank reserve requirement ratio reductions may follow soon after, pending forward guidance by the BSP, Roces said.
“The extraordinary environment we are in now may call for extraordinary measures and so authorities may opt for a policy mix that’s overweight on fiscal measures plus prudent monetary policies,” he added. INQ