Market expected to ease this week

MANILA, Philippines — The stock market is expected to retreat this week after the disappointing second quarter economic performance and some lower-than-expected corporate earnings.

Gross domestic product grew by six percent in the second quarter, while inflation soared to 5.7 percent in July. 

April Lynn Tan, chief equity strategist at COL Financial, said there are many factors causing fund outflows.

These include uncertainty on the US-China trade war, particularly how it would affect investments in China, profits of Chinese companies and companies dependent on Chinese exports.

China and countries with large exports to China account for a sizeable share of the emerging markets index, Tan said.

Catalysts for the market to recover are as follows: inflation has peaked, corporate earnings growth beat estimates, the US Fed stops raising rates and US-China corporate earnings remain strong even with the trade war.

These catalysts, Tan said, may only be seen in the fourth quarter at the earliest.

Chris Mangun of Eagle Equities said “there is strong indication that we will be seeing a pullback next week. 7,820 has proven to be strong resistance and despite the higher trading volume, the index could not break through. Investors will be factoring in the disappointing economic numbers that came in last week that exceeded most analysts’ expectations.”

However, if there is a pick-up in foreign inflow and in trading volume, investors may see the index continue to trade sideways.

“Despite the pullback, there are still a lot of opportunities out there. We have been very bullish on the property sector since the beginning of the year and we expect it to continue to perform well. We also favor the conglomerates that were laggards last year as investors have found it easier to make money from them compared to their peers,” Mangun said.