Shares may move sideways ahead of Q3 earnings

SHARES may continue moving sideways in the week ahead as investors look forward to the release of third quarter earnings reports.

The 30-company Philippine Stock Exchange index (PSEi) went up 0.14% to close at 7,151.52 last Friday, pushing the main index 2.1% higher on a weekly basis. The index was lifted by the mining and oil counter, which soared 9.6% last week, alongside financials that jumped 4.04%.

Daily turnover slimmed to P4.8 billion, seven percent lower from the previous week, while net foreign selling weakened by 29% to P393 million on average.

“With the first tranche of nine-month earnings, attention should firm up how corporates are strategizing on challenges of rising borrowing costs, and whether expansion plans are still soldiered on,” online brokerage 2TradeAsia.com said in a weekly market note.

Eagle Equities, Inc. Research Head Christopher John Mangun noted the same, saying that should earnings reports exceed expectations, this could be the catalyst the market is waiting for to start going up again.

“For [this] week, the market can trade sideways and shuffle around the 7,000-level or investors may come in and bargain hunt as there are several companies that have been taking a constant beating in the last few months,” Mr. Mangun said in a market report.

The analyst also flagged the constant foreign selling in the market, which will continue to drag the PSEi’s performance. As of Friday, the PSEi has already seen 37 consecutive days of net foreign outflows.

On the other hand, the appreciation of the Philippine peso last week could also uplift sentiments moving forward.

“The influx of OFW remittances in the fourth quarter may strengthen the currency further and may calm yet another concern of investors,” Mr. Mangun said.

Meanwhile, 2TradeAsia.com noted the general sentiment in markets overseas. Wall Street suffered losses in the previous weeks, due to a combination of geo-political tensions between the United States and Saudi Arabia, the US with China, and rising interest rates. This weakness has likewise dampened sentiment in Asian markets, including the Philippines.

“Most however, will have to come to terms on hints of rate tightening from the [US Federal Reserve], as this carries a weight in capital flows,” 2TradeAsia.com said.

Locally, the online brokerage said the upcoming midterm elections could turn into “marketmovers” for the end of 2018.

“During an election year, it is worth to note: local consumption (a major dynamo to national output) generally outperforms; and market-friendly policies can be expected to deepen support from the electorate,” 2TradeAsia.com explained.

Eagle Equities’ Mr. Mangun placed the PSEi’s support from 7,000 to as low as 6,800, with resistance to reach 7,200 to 7,500.