Stocks to move sideways ahead of Q2 earnings

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By Arra B. Francia, Reporter

THE Philippine Stock Exchange index (PSEi) is likely to continue trading sideways this week as investors anticipate second-quarter results that could push trading volume higher.

The bellwether PSEi dropped 0.64% or 46.86 points to end at 7,186.71 on Friday following the release of inflation data for June, which turned out to be much higher than expected.

The Philippine Statistics Authority reported that inflation picked up to 5.2% last month, a fresh five-year high that beat the local central bank’s estimate range of 4.3-5.1% and the Department of Finance’s 4.9% estimate, as well as the 4.7% median in a BusinessWorld poll.

On a weekly basis, the index ended 6.97 points lower or 0.10%, with the industrial sector losing the most at 0.80%, versus the 1.6% gain of the services counter. Turnover slowed to P4.92 billion on average per day, lower by 22% from the week before.

“We started the month slow ending almost unchanged from the close in June. However, the index held support at 7,150 which is impressive despite the very low trading volume that we saw this week. Based on the technicals, the index will continue to trade sideways,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market note.

Given higher inflation, online brokerage said people will be tightening their belts or at least cut back on non-essentials. This should prepare investors to put their money in assets with “good inflation hedge.”

“In equities, these are common in real estate assets and companies with solid recurring income sources… While controlling inflation rests on the hands of competent economic managers, it would be best to stay defensive by carefully selecting stocks anchored on business models where demand is supported,” said in a weekly market note.

Sectors with such demand include food and beverage, telco services, utilities, and fuel.

Philstocks Financial, Inc. said last week that good companies to invest in would be those with strong leasing income streams, such as SM Prime Holdings, Inc., Ayala Land, Inc., Megaworld Corp., and DoubleDragon Properties Corp.

Abroad, leads include developments on the trade war between the United States and China. While analysts noted the trade war has no direct impact on Philippine exports, it still continues to weigh on investor sentiment.

“All told, investors are simply scouting for opportunities to re-enter once negative headlines are fully absorbed. In the meantime, eyes are on first-half results and whether listed firms remain on track with their second-half prospects,” said.

Eagle Equities’ Mr. Mangun placed the index’s immediate support at 7,070, with resistance at 7,340.

“It’s all going to come down to volume, if we see more volume come in then we may end higher but if we get another low-volume week then we will see it come down even further,” Mr. Mangun said.