Thin trading, downward bias expected

Another week of sluggish trading is seen at the local stock market this week as investors track the local coronavirus infection trajectory alongside a string of mostly disappointing first quarter corporate earnings reports.

Last week, the main-share Philippine Stock Exchange index (PSEi) ended flat at 5,539.19 compared to the previous week’s finish of 5,541.95.

Trading will resume tomorrow as today (May 25) is a a non-working holiday in observance of Eid al-Fitr (Feast of Ramadan).

Jose Vistan, head of research at AB Capital Securities, said local equities would likely continue to trade on thin volume with a downward bias this week.

“Reality is beginning to set in as the COVID-19 pandemic continues to restrict movement and activity. This has dramatically reduced not only disposable income but also investible funds,” Vistan said.

“Adding to the markets’ worries is the growing tension between the US and China. This is seen to impede progress on the ultimate goal of developing a vaccine for COVID-19,” he said.

China is moving ahead with a new legislation that could curb political dissent in Hong Kong, a former British crown colony that has remained a semiautonomous territory since the 1997 handover. The United States, for its part, has frowned upon this move to curtail civil liberties.

“Investors are also on the sidelines, wary of the so-called second wave of COVID-19 in the country,” Vistan said, seeing the next support level for the market at 5,400.

Jonathan Ravelas, chief strategist at BDO Unibank, said continued foreign selling pushed the PSEi back to the 5,500 levels last week, despite earlier optimism over the reopening of economies worldwide.

“The week’s close at 5,539.19 highlights consolidation in the near-term. Risk-on theme remains fragile,” Ravelas said.

“Bias in the near-term remains to the downside and may see more price action toward the retest of the 5,000 levels,” he said.

Ravelas sees immediate PSEi support and resistance levels at 5,500 and 5,900, respectively.

Meanwhile, retailer Merry Mart Consumer Corp. is set to start its initial public offering (IPO) this May 27 through June 5. The company led by young tycoon Edgar Sia II priced the IPO—the first in the market this turbulent year—at P1 per share, targeting investors who seek a COVID-19 pandemic-resilient retail play. —DORIS DUMLAO-ABADILLA INQ