Index may test 7,800 level this week

MANILA, Philippines — The benchmark stock market index may bounce off the 7,500 support level and test the resistance at 7,800 this week.

Traders said this is what has been happening the last six weeks.

The trend may continue this week, said Chris Mangun, head of research of Eagle Equities.  

“The index must break the heavy resistance at 7,900 before we can confirm this reversal. If we don’t start to see a pickup in volume, the Philippine Stock Exchange index may continue in this congestion area indefinitely,” Mangun said.

Last week, the PSEi lost 211.20 points to end at 7,529.54. The index even dropped to as low as 7,480 in the morning session of Friday. It then recovered and closed above the very strong support at 7,500.

Value turnover reached P23.48 billion last week, which was above average since there were only three trading days.

On the other hand, net foreign selling surged to P4.01 billion last week, marking the biggest foreign outflow in a week so far this year.  

“It could be because the US Fed raised interest rates by another 25 basis points which will hurt countries like Argentina and Turkey. The Philippines is included in the MSCI Emerging Market Index along with Argentina and Turkey.  Investors are speculating that the EM index will go lower and since we are apart of that index, they will have to sell everything on the list, thus, the huge foreign selling,” Mangun said.

Among the sectors, the property sector took the biggest hit last week due to the huge foreign outflow, which means they were invested the most in that sector.

But Mangun said this gives investors a perfect opportunity to pick up these issues at a lower price. Thus, he said there may be some foreign buying this week.

2TradeAsia.com, meanwhile, said investors may take a closer watch on the next move of the central bank.

“This week central bank officials will convene to decide on local interest rates and how the peso’s weakness will be addressed,” 2TradeAsia said.