Stocks still under selling pressure

MANILA, Philippines – The stock market is expected to remain under selling pressure this week amid worries about the slowdown in China’s economy and the continued drop in global oil prices, analysts said.

“We expect the PSEi to face even more selling pressure this week as the recent oversold rally was not enough to provide upward momentum for the index,” Luis Limlingan, managing director at Regina Capital, said.

As a result, Limlingan said prices are seen retesting the 6,290 weekly support in an attempt to keep prices from falling toward Feb. 2015 support levels  of 6,000 to 5,900 points.

“On the positive side, we are still not discounting the possibility of a bullish reversal if the index recovers above 6,600 and holds above it for the rest of the week. As such, our recommended trading strategy for the week is to look for intraday rallies to sell or at least lighten up positions until such time that the index starts to show recovery signals,” he said.

Jason Escartin, investment analyst at 2TradeAsia.com, said it might be too early to hope for a reversal of the prevailing downtrend.

At the same time, Escartin said bargain hunters may gather some winners by the end of the year if they buy now.

“The first two weeks of 2016 has not been too auspicious for the markets and investors have been taking it on the chin. Understandably, risk aversion may save players sleepless nights but selective buying based on fundamentals would yield winners by the end of the year,” Escartin said.

Escartin said the benchmark Philippine Stock Exchange index is expected to hold its resistance at 6,590 and support at 6,450  levels  this week.

“A relief rally may not come as a surprise given the bargain prices but it might be too early to hope for a reversal on the much stronger demand,” Escartin said as he advised investors to trade prudently.

In the coming week, he said, investors would continue to take a look at China especially fourth quarter data and the December industrial production set for release on Tuesday.

“Previously, China’s balance of trade gave a welcome reprieve, offsetting pessimism among players. While it is unlikely for these economic items to reverse weak sentiment, better-than-expected results might prod some players to sell on rally,” he said.

Meanwhile, investment house Philippine Commercial Capital Inc.  expects the  main composite   index  to peak at 7,400 level this year before closing at 6,582 by year-end, while the  economy, as measured by gross domestic product (GDP), is projected to grow at a faster pace at 6.84 percent.

According to PCCI, election-related spending will boost the economy this year because of the May presidential and national elections.

At the same time, PCCI said acceleration in spending, higher GDP growth and demand for services are expected to pull up the inflation rate this year.

It expects inflation to rise to 2.9 percent, within the consensus estimate of 2 percent to 3 percent.

On the other hand, the peso is expected to depreciate to 48 to 49 against the dollar for the year.

PCCI also sees a rise in interest rates due to the rise in inflation and weaker peso.