LOCAL SHARES are expected to move sideways this week as investors monitor the Sino-US conflict.

The bellwether Philippine Stock Exchange index (PSEi) closed at 5,541.95 on Friday, down 112.75 points or 1.99% from the previous session. On a weekly basis, the PSEi was lower by 1.4%, declining for a second week.

Value turnover slowed 19% to P4.6 billion as foreign investors remained sellers with net outflows growing 32% to P651.22 million.

Online brokerage 2TradeAsia.com attributed last week’s performance to the frailty of investor sentiment over the possible extension of the Metro Manila quarantine. The government decided to put the capital under “modified enhanced community quarantine” (MECQ) for another two weeks, which would allow for some movement but still no public transportation.

It also attributed the PSEi’s decline to the growing friction between the United States and China, putting on the line the two countries’ trade relations which have been challenged since 2018.

“Part of the weak tone stemmed from (US President Donald) Trump’s renewed trade tension with China, lack of clarity on fiscal support in the US to combat the coronavirus, as well as development of new clusters of COVID-19 infections from China, South Korea and Germany,” 2TradeAsia.com said in a market note.

China’s foreign ministry said on Saturday the United States needed to stop the “unreasonable suppression” of Chinese companies like Huawei, and a Chinese newspaper said the government was ready to retaliate against Washington.

The Trump administration on Friday moved to block global chip supplies to blacklisted telecoms equipment company Huawei Technologies, spurring fears of Chinese retaliation and hammering shares of US producers of chipmaking equipment.

China will firmly defend its companies’ legal rights, the foreign ministry said in a statement in response to Reuters’ questions on whether Beijing would take retaliatory measures against the United States.

For this week, Philstocks Financial, Inc. Research Associate Claire T. Alviar said investors may still react to the Sino-US tensions, given that Mr. Trump already threatened to “cut off the whole relationship” of the US with China.

“We’re expecting sideways movement with a downside bias this week given the renewed tensions between the US and China,” she said via text. “Given that we are facing a pandemic, this is not an ideal time for the two big economies to restart the tension. This will significantly drag the economy, and will further weigh on investors’ sentiment in the equity markets, including the PSEi.”

But on the upside, she said investors may be optimistic over the implementation of an MECQ in Metro Manila as establishments start to operate again to jumpstart the economy. “This could be the support of the market for this week. Trading range could be at 5,400 to 5,700.”

2TradeAsia.com is putting immediate support for the market within 5,400-5,500 and resistance within 5,700-5,800. — Denise A. Valdez