Shares to decline further amid lack of fresh leads

SHARES may continue falling in the week ahead given the lack of catalysts that may encourage investors to return to the market.

The bellwether Philippine Stock Exchange index (PSEi) gave up 0.21% or 15.14 points to close at 7,078.20 on Friday, bringing its week-on-week loss to 2.73% or 198.62 points. Market participants stayed on the sidelines for most of the week as they focused on the release of September inflation data. The Philippine Statistics Authority announced on Friday that headline inflation printed at 6.7% last month.

The property and holding firms counters dragged the index, as they respectively dropped by 3.6% and 2% last week. Foreign investors also remained sellers, with average net outflows growing by 22% to P535 million each day.

“The index failed to close above the 7,200 support level which means the bottom that we saw back in July may not be the bottom that we had hoped for. Next key support level is at 7,000, and if that doesn’t hold there is no telling how low this market can go,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market note.

Mr. Mangun noted that as US markets and the dollar get stronger, foreign funds will also continue fleeing the local stock exchange. So far, foreign investors have been in net selling mode for 27 consecutive trading days.

Online stock brokerage 2TradeAsia.com also explained that investors are expected to favor bonds. For instance, 10-year US Treasury yields jumped to around 3.2% last week, the highest recorded in the last seven years.

“In light of the US Fed[eral Reserve]’s expected adjustment on its widely followed rate, funds flow has favored fixed income, ahead of an expected jump in yields. This partly explains some fund managers’ portfolio reallocation in favor of fixed assets, while waiting for macro catalysts to warrant their risk appetite for equities,” 2TradeAsia.com said in a weekly market note.

Eagle Equities’ Mr. Mangun also noted that while the Bangko Sentral ng Pilipinas said inflation has peaked in September, rising crude oil prices may still lead to a faster print in the months ahead.

“Nothing is giving investors the peace of mind to get back into the market. Last year we saw a one-directional market to the upside and this year we might see the opposite unless something positive happens fast,” Mr. Mangun explained.

Meanwhile, 2TradeAsia.com said participants may also start looking to nine-month earnings results, with the deadline for submission scheduled on Nov. 15.

“Participants’ focus will be on nine month earnings results, with special emphasis on quarter-onquarter improvements. Until the selling pressure ebbs, most might opt for defensive bets, especially for stocks worth holding for the long term with sustainable dividend yields,” it said.

The online brokerage placed the PSEi’s immediate support at 7,000, with resistance from 7,200 to 7,350. •