Investors seen to remain on the sidelines, await fresh leads

The local stock barometer is seen struggling to rise past 6,000 this week as investors await potential catalysts from the upcoming third quarter corporate earnings reporting season.

Last week, the Philippine Stock Exchange index (PSEi) slipped by 0.56 percent to close on Friday at 5,898.47. The P29-billion initial public offering of broadband provider Converge ICT mopped up market liquidity.

The index may extend its range trading this week between 5,700 and 6,000, said Manny Cruz, chief strategist at Papa Securities.

“Investors will likely bank on the passage of the 2021 budget and the continued reopening of the economy. However, apprehensions that third quarter earnings may disappoint will limit any market upside,” Cruz said.

Ron Acoba, chief investment strategist at trading research provider, Trading Edge Consultancy, said the PSEi might continue to trade within a tight band like in the previous weeks as investors remained on a wait-and-see mode.

“On the domestic end, we’ll see an indication whether consumption has really started to recover and at what pace in the upcoming third quarter earnings releases,” Acoba said.

On the global arena, Acoba said the major catalyst would be the upcoming presidential elections in the United States. Investors are weighing what a Donald Trump or Joe Biden presidency would mean for the markets. A fresh mandate for Trump would mean a pro-US business regime but another round of trade war with China may be on deck again, while a Biden presidency could result in higher corporate taxes, Acoba said.

“Anyhow, the PSEi is currently trading below a flat 50-day and 100-day moving averages and a downward sloping 200-day moving average. This suggests that its tilt remain to be sideways to down in the short run,” Acoba said.

Jonathan Ravelas, chief strategist at BDO Unibank, said last week’s market decline suggested that investors remained sidelined, “awaiting fresh leads that would signal demand is picking up and economic recovery is gaining traction.”

“The week’s close at 5,898.47 highlights further consolidation within the 5,700 to 6,000 levels in the near-term,” he said.

Average value turnover at the local stock market declined to P5.3 billion last week from the previous week’s P9.37 billion as some investors used their funds to subscribe to the IPO of Converge ICT. —DORIS DUMLAO-ABADILLA