More downward pressure to confront market this week

MANILA, Philippines - The stock market is expected to face more downward pressure this week as investors await the US Fed decision on interest rates, analysts said.

“US employment data due Friday may very well put another nail on the coffin of low interest rates.  While the Fed already hinted delaying the hike would have considerable downsides, a December rate increase is still no certainty,” Jason Escartin of F. Yap Securities said.

Luis Limlingan, managing director at Regina Capital, meanwhile, said the benchmark PSEi is likely to continue experiencing more downward pressure.

“The PSEi is expected to face more downward pressure this week following the failed resistance test,” he said. Limlingan noted that the PSEi could hit 6,720 this week.

“Revising 6,720-support is a possibility if 6,900 initial support breaks down,” Limlingan said.

He cautioned investors to keep a close watch on support for stocks that have recently corrected.

“Our range recommendation is maintained but we advise keeping a close watch on support for issues that recently corrected. For issues trading close at resistance, a range trade sell is advanced and then wait for prices to settle down before planning to position again,” he said.

In a weekly market note, Escartin said last week’s slump was driven by the drag in the mining and oil index, which declined 1.15 percent as well as the property sector, which dropped by 1.14 percent.

Value turnover rose 55 percent as net foreign selling prevailed and rose to P4 billion from P523 million.

Escartin said that in case pessimism over China becomes short-lived, there could be opportunistic that might aid the market toward window-dressing by yearend.

Immediate support, for the index is seen at 6,850 to 6,900, with resistance 7,000 at 7,080, he said.

“From a technical framework, the 30-day moving average (SMA) at 7,070 has proven to be a robust resistance area, with the index heading towards 6,870.  This marks the 2nd time since August the PSEi broke below 7,000, after an initial bounce from a plunge to 6,800,” he said.