Shares to trade sideways after hitting fresh low

THE MAIN INDEX is seen to trade mostly sideways in the coming days after hitting a new record low in 17 months last week due to concerns on the trade war between the United States and China alongside the peso’s depreciation.

The bellwether Philippine Stock Exchange index (PSEi) went down 0.49% to 7,063.20 on Friday, paring down losses at the closing bell after touching the 6,900 mark in early morning trading.

On a weekly basis, the market plunged 6.19% or 466.34 points, the biggest weekly loss recorded since June 2013.

The services sector led the week’s selling with a decline of 8%, followed by the 7% loss in holding firms. Losers prevailed versus gainers this week, 137 to 64.

Foreign investors continued to favor other markets, as net foreign selling ballooned to P6.60 billion, higher by more than 50% from the week before.

The Bangko Sentral ng Pilipinas’ decision to raise benchmark interest rates by 25 basis points for the second time this year last week also failed to cushion the PSEi’s fall as the peso continued to weaken against the dollar.

“It all comes down to the fact that investors who have held on to their positions as they thought they could wait out the correction, have finally realized it’s time to cut positions and get out of this market,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market note.

The PSEi has already fallen by more than 20% since its record high of 9,078 in intraday trading last January, officially characterizing a bear market.

Online brokerage 2TradeAsia. com said investors should focus on fundamentals amid the continued sell-off.

“In bear market investing, it is important to make key decisions on fundamentals, and see what catalysts would bring the fund flows in… Capex rollout may slow as the rainy season starts in the second quarter, but the overall drive to expand has not abated across the spectrum,” 2TradeAsia.com said in a weekly market note.

Given the market’s latest retreat, the brokerage said fund managers are now awash with cash, giving them the position to go bargain hunting next.

Eagle Equities’ Mr. Mangun placed the index’s support level at 7,000. If breached, the next support will be found at 6,800, which would indicate a 25% correction from the PSEi’s peak of 9,078 last January. Resistance will be from 7,200 to 7,400.

“Right now, investors are in panic mode as prices continue to fall, next comes capitulation and then finally despondency which signals a bottom in the market. These signals tell me that we are very close to a bottom,” he said.

The analyst also noted that it is better to stay away from bluechip stocks for the meantime, and scout for opportunities in second-liners.