Stocks seen sideways as markets turn cautious

LOCAL EQUITIES are seen to trade sideways in the week ahead as investors turn cautious on the supposed slowdown of the global economy, alongside lingering concerns on the trade war between the United States and China.

The 30-member Philippine Stock Exchange index (PSEi) dropped 1.07% or 84.68 points to close at 7,797.11 on Friday. Despite the decline on Friday, the main index jumped 2% or 155 points on a weekly basis largely due to the 4.6% gain in the financials counter.

“Local players gave more weight on slower February inflation as well as hints from new Bangko Sentral ng Pilipinas (BSP) Governor [Benjamin E.] Diokno to hasten cuts in reserve requirement,” online brokerage 2TradeAsia.com said in a weekly market note.

Turnover for the week was thin, averaging at only P5.9 billion daily or 44% lower from the week before. Foreign investors also left an average net sales print of P59 million versus net inflows of P612 million the week before.

“The main index held support at 7,600. However, if we continue to see thin trading volumes, the main index may continue trading sideways between 7,600 and 7,900 in the coming weeks,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.

“This may be attributed to the fact that the general investor sentiment is cautious as is all over the world over concerns on the USChina trade deal and worries over the slowdown in global growth,” Mr. Mangun added.

Last week saw China and the European Central Bank cutting their growth outlooks for the year, while the US and China have yet to announce how they plan to resolve their trade dispute.

Amid negative sentiment overseas, 2TradeAsia.com said the market may be more inclined to trade within range and after the local elections in May.

“Given the pace of fiscal infra rollout (post-election), revenueenhancing measures will deserve priority, specifically for sectors that have long lagged due to policy delays,” the online brokerage said, citing real estate investment trusts (REITs), mining, oil exploration, and renewable energy.

The firm noted that the approval of REITs will support property firms’ expansion, that the mining industry is a solid source of export earnings for the country, and that oil exploration could eventually reduce power charges.

Eagle Equities’ Mr. Mangun also noted that despite a dimmer global outlook, the Philippines’ economic fundamentals continue to improve.

“Decreasing inflation and stronger corporate earnings growth will improve market sentiment in the longer-term. If inflation stays below 4 percent in the coming months, we may see the BSP cut interest rates which will be a major catalyst for the equities market,” he said.

The analyst placed the market’s support level from 7,900 to 8,000, with resistance from 8,100 to 8,300.