THE MAIN INDEX may decline further in the week, with massive foreign outflows expected due to increased trade tensions between the US and China.

The benchmark Philippine Stock Exchange index (PSEi) rose 0.51% or 40.58 points to close at 7,889.41 on Friday. On a weekly basis, it was up 1.20%, breaking its four straight weeks in red.

“The PSEi may have ended with gains [last] week after finding strength at its support level of 7,750 however, we are still convinced that this market will continue to go lower,” AAA Southeast Equities, Inc. Research Head Christopher John Mangun said in a weekly market report, citing factors such as the ghost month and the large volumes of foreign outflows to be holding the market back, backed by the US-China trade feud.

“We will see more investors flee to save-haven assets like bonds and gold,” he added.

Net foreign outflows stood at P1.508 billion last week.

An increasingly bitter trade war between the world’s two largest economies sharply escalated on Friday, with both sides leveling more tariffs on each other’s exports.

US President Donald Trump announced an additional duty on some $550 billion of targeted Chinese goods on Friday, hours after China unveiled retaliatory tariffs on $75 billion worth of US goods.

Jervin S. de Celis, equity trader at the Timson Securities, Inc. also expects the market to decline this week due to the developments in the US-China trade war.

“The MSCI rebalancing also takes effect this week so it will also contribute to the large trading activity as fund managers reposition their holdings in our market,” he added.

“Another factor could be the weakness in the currency which gives foreigners an advantage for going back into the greenback. That being said, picking up blue-chips in the following weeks at massive bargains may prove to be profitable in the long run,” AAA’s Mr. Mangun added as to what might influence this week’s index movements.

“We see investors continue to look at second-liners and speculative issues as the performance of the recent IPO [initial public offering] has given some optimism that there is money to be made in this market. We have another shortened trading week due to the holiday,” he noted.

Local markets were closed yesterday for National Heroes Day.

Southeast Asian stock markets dropped on Monday, tracking a broader global sell-off, with the Thai index losing the most as an escalation in the tit-for-tat Sino-US trade dispute over the weekend battered risk appetite.

Asian shares sank as the latest move in the trade war shook confidence in the world economy and sent investors steaming to the safe harbors of sovereign bonds and gold, while slugging emerging market currencies.

The latest trade salvo will adversely affect China’s supply-chain partners and would add to warnings of “more acute exports pain in Asia with attendant downside to growth,” Mizuho Bank said. — V.M.P. Galang with Reuters

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