Weak shares trading seen this week

THE market is seen to trade weak as investors look for a strong catalyst to move the main index this week.

The benchmark Philippine Stock Exchange Index ( PSEi) snapped its three- day gaining streak on Friday as it finished last week’s trading 0.96-percent down, or 56.56 points lower, to 5,846.02.

Philstocks Financial Inc. research analyst Claire Alviar said weak trading is expected ahead after the release of gross domestic product (GDP) data and implementation of the modified enhanced community quarantine.

Last week, the Philippine Statistics Authority reported a 16.5-percent contraction in the country’s second quarter GDP, which plunged the economy to a “technical recession.”

“We think that investors will now look for [a] strong catalyst to move the index but for the mean time, many will stay on the sidelines,” Alviar said.

She added that August is a month where fund managers overseas have their vacation, which means there would be lesser market participants.

Alviar also said investors could be focused on the index recomposition where Emperador Inc. would rejoin the main index as a replacement to Semirara Mining and Power Corp.

On Friday, the PSE announced that Emperador would be replacing Semirara in the PSEi beginning August 17, as a result of an index review from July 2019 to June 2020.

“The semi-annual review of indices ensures that the exchange’s benchmarks reflect the performance of the best securities in the stock market in general and its sectors,” PSE President and Chief Executive Officer Ramon Monzon explained in a statement.

PSE noted that Emperador would also become a constituent of the industrial sector.

Given the developments, Alviar said the stocks are seen to move inversely with Emperador moving higher, while Semirara would go lower.

“The reason behind is that some big equity funds, local and foreign, that are investing in the index would only shift their funds from Semirara to Emperador,” she added.

Meanwhile, negative sentiment could also spill to the local market shouldJune data of foreign direct investments tumble anew, Alviar said.

The rally US markets’ have also experienced may be put on hold this week as investors might book some gains, which could also affect the local bourse.

“PSEi may try to test the 6,000 psychological resistance level in a week ahead but we’re anticipating a more sideways movement,” Alviar noted.