Stocks may extend climb on sustained optimism

PHILIPPINE SHARES may rise in the coming days amid signs of investor bullishness in the local bourse last week.

The benchmark Philippine Stock Exchange index ( PSEi) ended Friday’s session at 5,999.40, higher by 54.53 points or 0.91% from the previous day. It also marked the index’s third straight day of growth. On a weekly basis, the PSEi is up 160.74 points or 2.75%, snapping two consecutive weeks of decline.

Value turnover went up 26% to a weekly average of P5.31 billion.

But foreign investors were still in net selling mode, with net outflows jumping 69% to an average of P751.44 million.

“The PSEi surprised investors as it ended higher, right at the 6,000 key level. There was little activity at the beginning of the week as the general sentiment remains cautious… ( but) on Thursday, we saw the market rally right at the close as buyers noticed the diminished selling pressure and started picking up battered index issues,” AAA Southeast Equities, Inc. Research Head Christopher John Mangun said in a market note.

“Trading volumes picked up, but remain below its weekly average. This tells us that a lot of investors are still on the sidelines, waiting for a stronger trend before coming back in,” Mr. Mangun said.

But the overall movement of the market indicates that while investors are cautious, they have not lost hope. “The PSEi closed right at the 6,000-resistance level, which it may blow through at the beginning of the new trading week,” Mr. Mangun said.

Heading into the last quarter of 2020, among the primary drivers of the market will be the third quarter gross domestic product (GDP) report, scheduled for release on Nov. 10, and the third quarter corporate earnings reports, scheduled for release starting mid- October.

“Using our back-of-envelope assessment for the third quarter, some sectors are bound to perform better than others, at least sequentially: residential real estate, particularly those that have made leaps and bounds in revenue recognition; power, as commercial demand is back in the total demand equation; logistics, as outside of Metro Manila, mobility has been anecdotally improving sharply; and mining, as metal prices have starred in the third quarter,” online brokerage 2TradeAsia.com said.

However, it warned the market may see volatility due to the speakership row at the House of Representatives.

Other possible drivers of volatility in the near term would be the United States elections scheduled in November, and as incumbent US President Donald Trump contracted the coronavirus.

“Stay cautious and opt for modest gains, at least until visibility for positive ‘ spark plugs’ take form,” 2TradeAsia.com said.

The brokerage is setting immediate support for the PSEi at 5,750 and resistance within 6,000 to 6,150. AAA Southeast Equities’ Mr. Mangun puts support within 5,800, to 5,690 and resistance within 6,000 to 6,165.