Market to further weaken this week, say analysts

After falling to a six-month low last Friday, the stock market is seen to further weaken this week as the confluence of negative events continues to hound investor sentiment, analysts said.

"We expect bargain hunting to step up as the market seeks firmer ground below the 1,290 support range; initial support at 1,250, then 1,200," a report by BPI Securities noted.

The Phisix ended the week at 1,274.87 which is 40.13 points or 3.05 percent lower from a week earlier. PhilStocks.net, a local investment portal, said after breaching the critical 1,300 support level, the benchmark index was taken over by the bears, resulting in a sea of red stocks.

"Put together a coup in the Senate, a move to block the biggest corporate deal of the year, questions about property valuations, concerns of a pending war abroad and a spiraling confidence crisis in corporate America; what you get is a blood bath in the local stock market," the PhilStock.net report said.

As expected, issues involved in the speculative play as well as property issues led the market’s decline, PLDT, Metro Pacific, Digitel, JG Summit all fell as concerns of a long legal tussle on the Gokongwei-First Pacific deal weighed on the market. Relatedly, worries that the deal sharply pulled down property valuation in the Bonifacio Global City sent stocks of Ayala Land, SM Prime, Filinvest and Belle Corp. spiraling southward.

BPI Securities said as the speculative fervor surrounding the Gokongwei-First Pacific joint venture dissipated in light of mounting opposition to the transaction, the market’s decline steepened with a selldown of property issues. "The valuations used for Fort Bonifacio, as implied in the Gokongwei transaction, had an even greater impact on the market as investors adjusted asset valuations, consequently, sending share prices of major property issues lower," it added.

"The market’s decline is seen as temporary, driven primarily by a re-evaluation of property valuations and the consequent impact on share prices. Adding to the weakness has been the scramble by punters to square positions following the cessation of speculation," BPI Securities said.

Overall, however, the BPI Securities report pointed out that the market should remain weak up until companies can show confirmation of growth and earnings improvement from the second quarter onwards.

"It is sad to say this, but we need a major overhaul before the overall tone of the market improves. For now, the Phisix will continue to move within its downtrend channel, which emanated from its February high. The initial support of the main index will be at 1,230, which is at the lower band of the channel and the middle of the big white candle of Jan. 18, 2002," the PhilStocks.net report said.

This week, investors will be keenly watching new developments in PLDT and First Pacific unit Metro Pacific, especially as both hold their respective annual stockholders meeting tomorrow.