Stocks expected to enter consolidation this week
Stocks are seen to continue consolidating this week, while closing the gap created by the sell-off last Friday at the last trading day before the rebalancing of the main index.
The Philippine Stock Exchange index (PSEi) lost a total of 219.72 points or 3.36 percent last week, closing Friday at 6,320.19.
Starting today, DMCI and Emperador will be taken out of the PSEi and replaced by AC Energy and Converge, whose shares had already risen in recent days.
Meanwhile, the weights of other index components AGI, SMC, SM Investments, Jollibee, URC, AEV, LTG, JG Summit, Ayala Land and ICTSI have also been reduced. The sell-off last Friday was largely triggered by fund managers aligning with the PSEi rebalancing.
The PSEi has been unable to test the 6,700 resistance level especially now that new COVID-19 infections are rising, according to BDO Unibank chief strategist Jonathan Ravelas.
“The week’s close at 6,320.19 still implies further consolidation within the 6,300 to 6,700 levels in the near-term,” Ravelas said.
“However, a sustained break below the 6,300 levels will put the 5,700 to 6,000 levels at risk. Watch this space,” he added.
This will be the second week of the so-called ghost month, a period in the Lunar calendar when trading volumes thin out as investors avoid making big-ticket investments.
As expected, the Bangko Sentral ng Pilipinas kept its key interest rates at record-low levels during its monetary setting last week. The Philippines also reported its economy grew by 11.8 percent year-on-year in the second quarter, but contracted by 1.3 percent from the first quarter due to fresh lockdowns.
Think tank Fitch Solutions revised its gross domestic product growth forecast for the Philippines this year to 4.2 percent from 5.3 percent.
“The economy will face continued disruptions from the COVID-19 pandemic given its slow pace of vaccinations and difficulties containing outbreaks. With only 9.9 percent of the population fully vaccinated as of Aug. 5, the country remains a long way off from reaching herd immunity such that it can ease preventative measures more significantly,” Fitch Solutions said.
“The locking down of Metro Manila in August and the heightened threat from the more infectious Delta variant has led us to lower our expectations for domestic activity through second half of 2021,” it added.
