Share prices seen recovering with fund rebalancing

Philippine shares may recover this week after taking a hit last week because of the fund rebalancing, traders said.

“Philippine shares took a hit last week because of the MSCI rebalancing. We think that (this) week may be seeing a recovery backed by bargain hunting,” said Piper Chaucer Tan of Philstocks Financials.

The MSCI, which stands for Morgan Stanley Capital International is a global market index.

He said expectations of lower inflation in February means that the Bangko Sentral ng Pilipinas (BSP) may reverse its tightening cycle.

“Corporate earnings is also a major factor since the profits of majority of the index members posted double digit growth and some even exceed expectations such as Syowned BDO,” Tan added.

“With this earnings results so far, we are still bullish on our local stock market and fundamentals will play going forward,” Tan added.

Cristina Ulang, vice president of First Metro Investment Corp., also said more buying would likely characterize the market’s behavior this week.

“More buying will emerge next week, but it will be slow given a key sentiment mover which is the inflation outlook. The next inflation figure for February will be closely monitored,” Ulang said.

She said investors must understand that the investing landscape has changed and liquidity is king.

“Global passive fund flows now greatly rule the Philippine equities market trajectory,” Ulang said.

On the other hand, Jonathan Ravelas, chief market strategist at BDO, said the market may weaken further this week after last week’s fall.

“Last week’s close at 7,641.77 signals further weakness toward the 7,500 after the market just sliced below the 7,800 levels – like a hot knife through butter. Look to see if 7,500 support levels hold and a bounce occurs,” Ravelas said.

For its part, 2TradeAsia recognized that with the Philippine Stock Exchange index retracing as far as 7,588 last week, reassessing the 7,000 to 7,500 might elicit debates among chartists.

“It sees immediate support at 7,500, secondary at 7,300 and resistance at 7,700,” it said.

Global fund managers will also need clarity on how key officials will draft expected milestones of a US-China trade talks.

This could benefit companies that are dependent on raw materials. As such, timeline setting will be key in supply chain management especially for industries that have dependencies on key raw material inputs.