Investors are expected to continue trading with caution this week as they monitor government response to the recent spike in domestic coronavirus cases and the higher alert level on Taal Volcano, alongside key macroeconomic data.
Last week, the Philippine Stock Exchange index (PSEi) shed a total of 152.82 points or 2.22 percent to close at 6,728.55 on Friday.
“For the following week, investors will continue to focus on pandemic developments especially the government’s action in relation,” said Philippine National Bank Securities Manuel Lisbona said.
In the past, tighter restrictions on people’s mobility were always a market dampener, given the heavy toll on the domestic economy which suffered a record recession last year. So far, Metro Manila mayors have announced a uniform curfew of between 10 p.m. to 5 a.m. for two weeks starting March 15.
Lisbona said inflation fears would likewise continue to linger, especially in the wake of sustained stimulative action by various governments worldwide. He noted that the US government’s recently approved $1.9-trillion stimulus package was expected to be distributed starting this weekend.
“Another possible factor that may affect the market is that Taal Volcano has become increasingly restive over the past days. Last year’s eruption caused more than half a billion pesos worth of damage to crops, livestock and property. A repeat could drive food prices higher,” Lisbona said. In January and February, inflation rate in the country has overshot the 4 percent upper-end of the Bangko Sentral ng Pilipinas’ target range.
“Chartwise, the first line of support will be 6,612, which was the low for 2021, with a possibility of retesting 6,500,” Lisbona said.
Resistance level for the PSEi remains at 7,000, he added. BDO Unibank chief strategist Jonathan Ravelas said last week’s market decline was due to the the rising domestic COVID-19 cases.
“This caused investors to lock in gains from recent bounces and stay on the sidelines awaiting further news that will propel the economy forward,” Ravelas said. He said the week’s close at 6,728.55 signaled a consolidation between 6,700 and 6,850 levels in the near-term as the 6,700 levels held ground.
“But a sustained break below the 6,700 will trigger tests towards the 6,300 to 6,500 levels,” he said.