Index seen testing 7,150 level this week

MANILA, Philippines - The Philippine Stock Exchange index (PSEi), is seen testing the 7,150 level this week after the US Federal Reserve hinted it could further delay hiking interest rates.

“The PSEi could test resistance at 7,150.  If this is pierced on strong volume, an increase toward 7,200 to 7,300 might be seen, but remember a retracement is also likely,” said investment analyst Jason Escartin of F. Yap Securities.

Luis Limlingan, managing director at Regina Capital advised keeping a close watch on resistance especially on the first two days of trading this week. 

In minutes of its September meeting released last week, the US Fed said there are still lingering concerns on the global economy.

This was in contrast to expectations the US Fed would raise rates soon or before the end of the year. Last September, worries on the global economy prompted the US Fed to hold off any rate increase.

Escartin said headlines of possible delay in the Fed rate supported a surge in equities, raising the PSEi by 288 points to close at 7,138. Week on week, this showed an increase of 4.21 percent.

Many analysts have said the story for the US Fed will remain tied to policy tightening.

The Fed is looking for recovery in its labor market and sustained inflation at two percent, analysts said adding this means that should inflation fall below target, equities could surge on the heels of another delay in liftoff. 

Escartin said investors would also continue to take a close watch on indicators from China.

“The key reason why investors will be closely watching data out of China is to see how its transition from an export-driven economy to a consumer-oriented one is faring.  Specifically, slower-than-expected slowdown in manufacturing (as inferred from trade and inflation) may hint at a broader slowdown, which would have ripple effects across the region,” he said.

For the longer-term view, April Lee Tan, Head of Research of COL Financial Group Inc. said the PSEi may still hit 7,950 by year-end.

“Based on technical analysis, which factors in the negative impact of the market’s steep decline on investor sentiment, the market’s upside is initially limited to 7,200 to 7,300. However, based on fundamentals, our target for the PSEi is 7,950. This is based on our fair value estimates for each listed company in the PSEi index, ” Tan said.