After the long weekend break, the local stock market is seen to give up some of its recent gains this week as risk aversion remains high due to the new coronavirus pandemic.
Last week, the main-share Philippine Stock Exchange index (PSEi) advanced by 235.73 points or 4.31 percent to close on Thursday at 5,700.71.
There was no trading last Friday due to a nonworking holiday in observance of Labor Day.
“Pullback is due following its 40 percent plus rally off its March low, which it made inside just six weeks,” said Ron Acoba, chief investment strategist at trading research provider, Trading Edge Consultancy.
“Decline may not be as fast as in the past, but I expect it to resume its general bear trend,” Acoba said.
BDO Unibank chief strategist Jonathan Ravelas said that last week’s PSEi gain tracked upbeat regional markets as some territories started to lift restrictions related to COVID-19 lockdowns. These developments allowed the PSEi to breach 5,600 and then, 5,700 levels.
“The week’s close at 5,700.71 still highlights near-term bounce as a mere technical rebound and is not sustainable,” Ravelas said.
“This may see more price action towards the retest of the 5,000 [support] levels in the near-term,” he said.
Ravelas sees the PSEi’s immediate support and resistance levels are seen at 5,500 and 5,900, respectively.
Effective today (May 4), the PSE’s new three-level circuit breaker will take effect, allowing the local bourse to better control extraordinary volatility.
The new system will have multiple circuit breaker triggers for declines in the benchmark index, PSE index, of at least 10 percent 15 percent and 20 percent, resulting in a market-wide trading halt lasting 15 minutes, 30 minutes and 60 minutes, respectively.This replaces the old system, an offshoot of the 2008 global financial crisis, which halted trading for 15 minutes whenever the PSEi declined by at least 10 percent once per trading session.
The new circuit breaker levels can only be triggered once per trading day. In case the higher level is breached first, the lower level circuit breaker will no longer be triggered on that trading day.—Doris Dumlao-Abadilla INQ