SHARES MAY continue to trade sideways in the week ahead as investors digest the government’s decision to cut growth targets.
The benchmark Philippine Stock Exchange index (PSEi) climbed 0.61% or 47.86 points to 7,798.28 last Friday. Last-minute buying allowed the index to register gains on a weekly basis, although only minimally at 0.02%. The services counter’s 1.83% weekly gain was offset by a 1.6% drop in holding firms.
Average turnover for the week increased by 42% to P8.54 billion as Friday’s P21-billion turnout lifted the thin trading that settled just above P5 billion for most of the week. Net foreign buying averaged at P280 billion, versus a net selling position of P59 million in the week before.
“The main index may continue to trade between the trading range between 7,600 and 7,900 in the coming weeks,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.
Mr. Mangun noted how the government last week cut its 2019 gross domestic product (GDP) growth target to 6-7% from 7-8% previously due to delays in approving the National Expenditure Program.
Socioeconomic Planning Secretary Ernesto M. Pernia said last week that operating on a reenacted budget will likely stunt GDP growth to as low as 4.2-4.9% this year versus the country’s 6.2% growth last year.
“Investors may have been expecting this, thus the cautious sentiment,” Mr. Mangun added.
Meanwhile, growth is seen picking up to 6.5-7.5% in 2020 before rising to 7-8% in 2021 and 2022.
On the other hand, the economic team retained their inflation forecast at 3-4% this year and 2-4% annually until 2022, confident that price increases will go back to normal from last year’s surge.
Online brokerage added that investors will be looking at results of the policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) happening this week.
The Federal Open Market Committee will convene on March 19-20, while the BSP policy review will follow on March 21.
“The likelihood for a status quo on the Fed rate is gaining ground, especially with the recent weakness in select key spending data in the US. At home, several players are starting to price in a cut in the reserve requirement from the new BSP chief, a move that should help induce lending to support capital rollout,” said in a weekly market note.
The online brokerage said risks are still present for local equities as the Senate and House of Representatives have yet to approve the national budget. Both houses of Congress are currently on recess. The session will resume on May 20 until June 7.
“Efforts must also be made in addressing the water shortage dilemma, on top of countering efforts to mitigate El Niño’s impact on agriculture,” said.
Eagle Equities’ Mr. Mangun placed the PSEi’s support at the range of 7,600 to 7,700, while resistance is from 7,900 to 8,000. — Arra B. Francia