VOLATILITY may prevail in the week ahead, following the Philippine Stock Exchange index’s (PSEi) sharp decline last week due to a mix of geopolitical concerns and fears of an overheating economy. 

The bellwether PSEi ended 0.57% or 44.48 points higher to 7,726.72 last Friday, managing to eke out gains after its steep fall on Thursday. The main index had dropped by more than 3% in that session, but was able to pare down losses before the market’s close. 

On a weekly basis, the index lost 2.19% or 173.26 points. Volume, however, started to pick up, with value turnover rising 43% to P7.52 billion on average. Foreign outflows swelled to P580 million versus the P350 million recorded the week before.

“Negative undertone prevailed during the week and pulled gauges to weaker terrain. The threat for a potential border conflict in Syria following the firing of cruise missiles against Bashar al-Assasd’s regime prompted sellers to panic,” online brokerage 2TradeAsia.com said in a weekly report.

The online brokerage said these dips in the index can provide buying windows for investors.

“Regardless, the global economy moves in cycles and there are pain points to consider in any adjustment process. The reality is that there are people who will prevail in these trying times, versus those who are quick to throw in the towel. This phenomenon explains volatility that presents buying windows,” the company said. 

Eagle Equities, Inc. Research Head Christopher John Mangun gave two possible outcomes for the index this week, with the first scenario placing the market on a consolidation mode within the 7,600 to 7,750 range. On the other hand, the index could also trek lower by 200 points until it reaches a support level at 7,500.

“If this happens, we will see volume or value turnover pick up,” Mr. Mangun said in a weekly market report.

The Eagle Equities analyst, however, flagged concerns of rising oil prices, which have been hitting record high prices since 2014.

“Higher oil prices mean higher inflation, and this may have a negative effect on the market. Small and mid-cap companies still pose better opportunities for investors,” Mr. Mangun said.

2TradeAsia.com also pointed to first-quarter earnings results to guide investors in making decisions on buying stocks.

“Moving further, preliminary indications of first-quarter 2018 performance will serve as proxy guidance, that may convince skeptics whether growth targets will be in line this year,” the online brokerage said.

2TradeAsia.com placed the index’ immediate support between 7,500 to 7,600, while resistance will be from 7,800 to 7,900.

Meanwhile, Wall Street’s three major indexes declined on Friday as investors worried about a jump in US bond yields, with technology stocks leading the decline on nerves about upcoming earnings reports and iPhone demand. — Arra B. Francia with Reuters