Local stocks may trade with an upside bias this week as the US Federal Reserve’s dovish stance and a string of favorable regulatory developments here are seen to provide relief to investors.
The main-share Philippine Stock Exchange index (PSEi) gained 153.4 points or 2.3 percent last week, closing Friday at 6,786.62, as market jitters eased ahead of US Fed chair Jerome Powell’s speech at the Kansas City Fed’s annual Jackson Hole symposium.
On Friday, Powell said the Fed was not in a hurry to start raising key interest rates, although the tapering of bond buying operations, which have helped inject massive liquidity into the financial markets in recent months, would start within this year. “A combination of dovish stance by the Fed during the recent Jackson Hole symposium and tons of domestic liberalization as opposed to strict government regulation and witch hunt in the past are likely to stoke foreign interest in the market again,” said Ron Acoba, chief investment strategist at equities research provider Trading Edge Consultancy.
“Risk-taking is seen to be back on,” he added.
Acoba suggested the market would also welcome the Duterte administration’s change in regulatory stance toward liberalization, such as in the telecom, gaming and mining sectors.In the past, the government’s crackdown on water utilities, mining, ABS-CBN and Philweb weighed down market sentiment.
Acoba sees the PSEi’s next resistance levels at 6,940 and 7,000, while support is seen at around 6,650.
BDO Unibank chief strategist Jonathan Ravelas said the stock market was drawing strength from improved local corporate earnings outlook, especially for blue chips in the telco, retail and conglomerate counters, alongside the risk-on sentiment in Wall Street.
“However, the rising new infections arising from the Delta variant may limit the market’s rally,” he said.
Ravelas said last week’s close at 6,786.62 signaled that the market may still have some gas to try the 6,850 to 6,900 levels in the near-term.
“Failure to test said levels could trigger some profit-taking,” Ravelas said.
The stock market is set to resume trading on Tuesday after a long weekend break. The stock market is closed today, Aug.30, due to a national holiday in observance of National Heroes’ Day.