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Market may drift lower over uncertain economic outlook

Share prices are expected to continue to drift lower amid uncertainties over the prospects of the economy because of the pandemic.

Analysts said the while first-quarter earnings of listed companies have been positive, overall sentiments remain subdued as investors continue to be wary about the economy in the wake of continued restrictions due to the pandemic.

“The week’s close at 6,258.71 signals the market’s continued march towards the 6,000 levels is gaining momentum,” BDO Unibank Inc. chief investment strategist Jonathan Ravelas said.

“Should this decline accelerate in the coming days, it could put the 6,000 levels to the test and if it breaks, this could put the 5,700 levels at risk. However, should the 6,000 levels hold, expect a sizable bounce towards the 6,500/6,700 levels in the near term,” he added.

Ravelas said investors are concerned about the outlook on the economy despite decelerating infection cases, the steady inflation rate in April at 4.50 percent, and an improvement in the unemployment rate to 7.10 percent in March.

Meanwhile, investors will likely focus on the first-quarter gross domestic product data scheduled to be released this week.

While the government has maintained its 2021 GDP target of 7.5 percent, analysts said the first-quarter performance and indications for the second quarter will dictate the tempo of trading over the near term period.

“The PSEi has retraced towards the critical 6,000 psychological support despite overall rebound in earnings. Textbook investment theory tells us that the stock prices should move with market expectations. This recent slide implies that the market is expecting another round of earnings downgrades, which is unlikely given how deep earnings bottomed out in the second and third quarter of 2020,” online brokerage firm 2TradeAsia.com said.

The Philippine Stock Exchange Index dropped 1.8 percent to 6,258,71 amid lackluster trading brought about the uncertainties on the economy.

Except for services, all sectoral indices posted week-on-week declines, led by holding firms (-3.3 percent), property (-1.1 percent) and industrial (-0.6 percent).

The average value turnover fell to P4.5 billion while average foreign selling reached P510 million.

Meanwhile, Wall Street indices ended at fresh records Friday, while the dollar tumbled after disappointing US jobs data fueled confidence of continued fiscal and monetary support as the economy recovers from COVID-19. 

Economists had projected the economy would add a million positions as vaccines and government stimulus measures allow business to return to normal in the world’s largest economy.

But the United States added only 266,000 jobs, and the March increase was revised lower, while the unemployment rate rose slightly to 6.1 percent, the Labor Department reported.

That amounted to a “bust,” according to Cresset Capital’s Jack Ablin, while economist Joel Naroff characterized it as an “aberration” that belies other indications of a strengthening labor market.

In any case, stocks clearly were not troubled. Both the Dow and S&P 500 finished at all-time highs, while the Nasdaq gained nearly one percent. With AFP

Topics: Stocks , Philippine Stock Exchange Index , Jonathan Ravelas , Pandemic , COVID-19
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