Market may drop further this week

Share prices may decline further this week with the next support level seen at 7,400, analysts said.

The stock market had a bad week last week, as investors reacted negatively to the runaway inflation of 6.4 percent in August and as it found itself at the center of an emerging markets rout.

Harry Liu, president of Summit Securities Inc. said market investors would likely wait for inflation to tame before going back to the market.

Liu said a lot of the concern had to do with the latest inflation number, the highest in more than a decade. He believes the market would continue to spiral downward until the inflation situation stabilizes.

“The next support level is 7,400,” Liu said.

Chris Mangun, head of research at Eagle Equities, echoed the same sentiment, attributing the decline also partly to inflation.

“Just as it was starting to recover, the market ran into another roadblock last week. The PSEi ended the week down 257.07 points or 3.27 percent. Heavy foreign outflows are one of the main causes for the decline with foreign net- selling at a staggering P4.43-billion. This was due to the fact that the closely monitored MSCI Emerging Markets ETF fell as much as -0.6 percent last week, bringing the decline from the all-time high reached in January to more than 20 percent,” Mangun said.

Last week, total turnover value was average at P30.42-billion, with the financial sector down the most because of losses in the big three banks, BDO, BPI and Metrobank.

Mangun said the market starts September with a setback, down more than three percent and wiping out all the gains that we saw in August.

However, he believes, based on market sentiment this is only temporary.

“The index is barely hanging on to our 7,600-support level which is better than seeing it go all the way back to 7,500.