Lower Q2 earnings may dampen market

The benchmark Philippine Stock Exchange index (PSE) may struggle to stay above the 8,000 mark as some companies reported lower-than-expected second quarter earnings.

Nevertheless, traders said the market may still try to reach the 8,100 to 8,150 level.

“Chartwise, the week’s close above the 8,000 level continues to highlight that the market still has momentum to try the 8,100 to 8,150 level. Immediate support and resistance is seen at 7,850 and 8,100 level, respectively,” said Jonathan Ravelas, chief market strategist at Banco de Oro.

Last week, the market barometer PSEi was slightly lower as market players took a defensive stance as they await fresh leads that could sustain the market’s rally above the 8,000 level.

Market players see the passage of the tax reform bill as a key driver to sustain the government’s infrastructure program, Ravelas said.

For his part, Justino Calaycay of Philstocks Financials said mixed results from European and US trading left local investors with little to begin with last week.

“Five straight days of black candles indicates the bears have gained a foothold at current levels preventing the index from rising further. A slight fight-back by the bulls on Friday lent some modicum of hope as the measure nears immediate support at 7961.90,” he said.

The one-month uptrend that developed from the 7,734.52 low at end-June, remain intact even as the 8100-resistance stayed strong.

Calaycay said participation and activity has obviously slowed, an expected character of markets during the ghost months.

He urged investors to take a cautious stance “until fresh and positive catalysts come to the fore.”

First Metro Investments Corp. said the PSEi would continue to track Wall Street.

“With the US economy growing by 2.6 percent in the second quarter and July adding 209,000 jobs on top of a 231,000 (revised upward) gain in June, Dow Jones Industrial Average (DJIA) hit another record above 22,000 on Aug. 2 just two days before the employment numbers emerged. This may have pushed US stocks to levels that would call for a consolidation especially during the ‘ghost month’ of August. The PSEi, which has moved more closely with the DJIA in July would likely follow suit,” FMIC said.