Index may trade sideways this week

Share prices may trade sideways this week on concerns over the escalation of the US-China trade war and rising inflation, analysts said.

DA Market Securities said that if the trade war escalates for the worst, the stock market index may plunge below the 6,900 level. On the other hand, if the trade war ends positively, the 8,000 may not be too far from the horizon.

Tariffs on $34 billion worth of Chinese goods kicked in last week, prompting a response from China, which implemented retaliatory tariffs on some imports from the US.

Moody’s Capital Markets Research said an extended trade war may cause the indefinite volatility of the local financial markets.

“Given the global complexities of modern supply-chain management, a surprisingly large number of US-based businesses may delay capital spending and staffing plans until trade-related uncertainties are sufficiently resolved. As it now stands, tariff-driven increases in material costs have compelled some companies to rein in employee compensation for the purpose of protecting profit margins. In addition, higher materials costs have been weighing on the credit quality of some manufacturers that use steel intensively,” Moody’s said.

Last week, market barometer Philippine Stock Exchange index tumbled by 0.10 percent week-on-week to settle at 7,186.71 after the government reported that inflation in June reached a five-year high of 5.2 percent.

With this, another central bank policy rate hike is looming.

The market performance last week indicates the trading may move sideways this week, said Chris Mangun of Eagle Equities.

“Based on the technicals, the index will continue to trade sideways. Immediate support is at 7,070 while resistance is at 7,340. It’s all going to come down to volume, if we see more volume come in then we may end higher, but if we get another low-volume week, then we will see it come down even further. Inflation came in way above analysts and government expectation which may also be a factor for investors in the following days. Investors will continue to look for opportunities in second liners,” he said.