Shares to decline further on US-China trade war
By Arra B. Francia
Senior Reporter
LOCAL SHARES may dive further in the week ahead as foreign investors continue their sell-off in the face of the ongoing trade war between the United States and China.
The benchmark Philippine Stock Exchange index (PSEi) jumped 1.45% or 108.66 points to close at 7,583.82, snapping a five-day losing streak. The main index fell 2.04% on a weekly basis due to weakness in the industrials and holding firms counters, which dropped 4% and 3.8%, respectively.
Net foreign outflows averaged at P1.46 billion during the four-day trading week, much higher than the P541 million recorded the week before. Turnover was also significant at P8.92 billion, 27% higher from the week prior.
“Several external factors continue to spook investors, the ongoing trade war which has been seen as a cause for slower global economic growth is the biggest concern,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.
Mr. Mangun noted that while the trade war will have only a minimal impact on the Philippines, negative sentiment from regional markets has “taken its toll on foreign and local investors in the PSE.”
Online brokerage 2TradeAsia.com said markets may have to get used to volatility given the ongoing trade spat.
“Hopefully, both (US and China) will agree to work on terms conducive to consumer and corporate spending, with the greater goal of enhancing trade. For now, markets may need to get used to this volatility, until both realize their unique competitive advantage that complements the others,” 2TradeAsia.com said in a weekly market note.
The company also noted that investors will look at what the House of Representatives will focus on during the resumption of their session on Monday. There will be interest about tax reform, especially the reduction in corporate income taxes and the rationalization of other fiscal incentives.
“Investors will also check how government would map out its timeline on infra rollout, with the onset of the rainy season in the third quarter. Accelerated construction pace appears more likely in fourth quarter, especially with more funds available for lending from BSP’s (Bangko Sentral ng Pilipinas) three-phased cut in reserve requirement,” the online brokerage said.
On a technical note, Mr. Mangun said that the PSEi’s break below the 7,500 level will push it lower to the next strong support of 7,000.
“The best case scenario is for it to hold its support at 7,500 for the next few weeks as foreign funds flow out. This will only happen if local investors pick up the slack and buy shares as they are at very attractive levels,” Mr. Mangun said.
The analyst placed the PSEi’s support from 7,500 to 7,640, with resistance from 7,800 to 7,900.
