Cautious trading seen this week

The local stock market is seen to trade with caution this week as investors track fresh lockdown measures amid rising COVID-19 cases.

Last week, the main-share Philippine Stock Exchange index (PSEi) gained 1.58 percent to close on Thursday at 6,545.17 as investors welcomed the easing of the inflation rate in March.

“The local market is expected to move sideways with a negative bias in the coming week. The weak bias is brought about by a near term resistance at 6,700, where we see a near convergence of the 50-day and 200-day exponential moving averages. The said level is also the upper band of the medium term down trend channel. However, we do see limited downside with support seen at the 6,450 level,” said Jose Vistan, head of research at AB Capital Securities.

Ron Acoba, chief investment strategist at equities research provider Trading Edge, said the PSEi might open in the green, noting that last week’s sluggish finish was mostly due to last-minute market-on-close sell orders.

“It may nonetheless remain bounded in a very tight range with a resistance at 6,650,” Acoba said. “Technically, the index is already primed for a notable move with an upside tilt as it nears the apex of a falling wedge pattern,” he added.

Jonathan Ravelas, chief strategist at BDO Unibank, said the declining market turnover reflected “investors’ lack of conviction as the recent COVID-19 situation remains uncertain.”

“The week’s close at 6,545.17 signals the market could still test the 6,300 levels in the near-term. Any rally could just be limited toward the 6,700 levels,” he said.

Despite the recent rise in COVID-19 cases in the Philippines, AB Capital Securities’ Vistan said the market was hopeful that the recovery narrative was still viable.

“With the economy remaining fragile and expectations turning hopeful, we should see lower volatility. Sentiment may remain weak and this will be reflected more on dwindling volume rather than stock prices,” Vistan said.

Vistan said he doubted that the losses seen in 2020 would be replicated in the same period this year.

“Our confidence stems from expectations of a recovery in earnings due to a low base last year,” he said.

Doris Dumlao-Abadilla INQ