PSEi may fall below 6,000 points

The benchmark stock market index is expected to drop below 6,000 points in the near-term period but will not hit recent lows as financial conditions are better today compared with previous crises, according COL Financial, the nation’s biggest online stock brokerage.

COL Financial chief equity strategist April Lyn Lee-Tan said the strength of the Philippine Stock Exchange Index was not sustainable over the near-term period because of the significant impact of the coronavirus (COVID-19) pandemic on the economy.

She said the rising positive cases of COVID-19 could delay the full reopening of businesses, which would in turn affect the growth of the overall economy.

The government earlier said Metro Manila may go back to a modified enhanced community quarantine if COVID-19 cases reached 85,000 by the end of this month.

Tan expects the economic recovery to be U-shaped rather than V-shaped.       

The non-participation of foreign investors into the country’s stock market is also preventing the PSEi from sustaining a upward momentum.

Tan, however, does not expect the index to drop to recent low levels of around 4,600 given the country’s strong macro-economic indicators.

COL Financial chief technical analyst Juanis Barredo said the PSEi could drop to the 5,750-5,300 level over the near term period on low volume, net foreign selling and seasonality threats that occur in August. He expects the index to hit the 6,300-point level before rising to 7,000 by the end of 2021.

Tan favors Puregold Price Club Inc., Century Pacific Food Inc. and PLDT Inc. among the pandemic-resilient sectors.

Among non-resilient sectors, Lee-Tan prefers Ayala Land Inc., Megaworld Corp., BDO Unibank Inc., Metropolitan Bank & Trust Co., D&L Industries Inc. and Aboitiz Power Corp..

The PSEi last week fell 1.4 percent to 6,003.24 while the broader All Shares Index dipped 1.3 percent to 3,533.01.

Foreign investors were net sellers by P1.72 billion, while the average daily value traded stood at P3.8 billion.

Global equities, meanwhile, took a beating Friday as China-US tensions intensified, while stalled stimulus talks in Washington fueled fears for the economy as the dollar fell further.

Lingering worries about the impact on businesses of fresh coronavirus outbreaks helped trigger major profit-taking, overshadowing a batch of bright data in Europe.

“It’s a sour end to the trading week,” said AJ Bell investment director Russ Mould.

European indices were as much as two percent lower at the close, while Wall Street stocks suffered a second straight session in the red.

Earlier in Asia, Shanghai and Hong Kong dived as relations between the world’s two superpowers took another bad turn when China ordered the closure of the American consulate in Chengdu in retaliation for the United States shuttering Beijing’s diplomatic mission in Houston this week.

The standoff is the latest in a string of issues”•including Hong Kong, coronavirus and Huawei”•that have dramatically worsened relations between the superpowers.

Stock markets were also still reeling from Thursday’s report of a rise in new jobless claims in the US, which prompted doubts about any ongoing economic rebound there, traders reported. With AFP