Stocks face pummelling from Delta variant, shaky peso

Local stocks are seen to trade with downward bias this week as the recent weakening of the peso against the US dollar and the local transmission of the dreaded Delta variant of the coronavirus may continue to sour investors’ interest.

The main-share Philippine Stock Exchange index (PSEi) declined by a total of 141.09 points or 2 percent last week, closing Friday at 6,693.83.

News of the local transmission of the Delta variant of the virus that causes COVID-19 has “further deteriorated local investor sentiment causing investors to sell and stay on the sidelines,” said Jonathan Ravelas, chief strategist at BDO Unibank. The week’s close indicated “the bears are in control,” Ravelas said, adding that the PSEi could test the 6,300-6,500 levels in the near-term.

Ron Acoba, chief investment strategist at Trading Edge Consultancy, said the index could pull back further toward the next psychological support level of 6,500, which would show a 61.8-percent Fibonacci retracement of its most recent rally.

Acoba said the hawkish tone of the US Federal Reserve, amid talks about an earlier-than-expected interest rate hike and possible tapering of US monetary stimulus, coupled with the Bangko Sentral ng Pilipinas’ dovish stance in maintaining interest rates at record lows to support the economy had dragged the local currency.

From just 47.60 against the US dollar at the start of June, the local currency is now trading at 50.50 against the greenback. INQ