Market to remain cautious this week

MANILA, Philippines - Investors are expected to remain cautious this week due to weakening technical factors, analysts said.

“A more cautious stance is advised this week. We expect a choppy weekly trade with trend bias on the downside due to weakening technical factors. 6,900 is still the key level to watch for this week as a successful hold will keep our rally conditions intact,” said Luis Limlingan, managing director at Regina Capital.

Share prices need to hit the 7,200-level and trade on solid momentum to reverse last week’s weakness, analysts said.

However, this could only happen if there is enough positive stimulus that could encourage investors to go back to the market.

In all, analysts advise investors to take a more cautious stance this week as the benchmark Philippine Stock Exchange index (PSEi) continues to struggle on the lack of positive leads.

For investors on the look out for what to buy, he recommends staying light on positions and to wait for a clear support bounce before accumulating.

Jason Escartin of 2Trade Asia.com said that in the past week, the PSEi tested resistance at 7,070 (30-day simple moving average) and has yet to surpass this mark since its drop below 6,800. 

“For now, the market may just trade within 6,800 to 6,900, unless strong catalysts emerge.  Also, the PSEi needs to trounce 7,200 on solid momentum, to reverse its weak trend.  Scout for bargains below 7,000 and continue to trade within range.  Immediate support is 6,850, resistance 7,000 to 7,030,” Escartin said.

Overall, however, he sees a bearish streak ahead of the US Federal meeting in December.

“Players will likely note latest US employment suggest a rate hike at the Fed’s Dec. 15 to 16 meeting would not be unwarranted. Around 211,000 jobs were added for November, higher than estimates of 200,000.  It also followed a 298,000 increase in jobs for October,” Escartin said.

Nevertheless, he said investors might wait for clearer affirmation whether the global recovery is finally taking hold, given the divergent policies in US and Europe. 

Investors are particularly looking at whether the economic recovery in the US and Europe could affect exports and imports as well as dollar remittances from overseas Filipinos.

“Specifically, players would want to check if policies from these industrialized economies could weigh on trade (exports-imports), remittances, international reserves and external debt, among others,” Escartin said.