Market seen slowing down as earnings season ends

MANILA, Philippines - The conclusion of the earnings season and uncertainties over key developments overseas will dampen sentiments in the stock market this week, analysts said.

Overseas headlines like tensions in Ukraine and US Federal Reserve tapering will dictate trades in a week marked by healthy correction, they said.

“Prospective weakness might still be felt early this week, with no firm resolution in sight yet on the geopolitical conflict in Ukraine,” said online brokerage firm 2Trade-Asia.com.

“The ongoing technical correction, along with the dampened sentiment on fundamental factors, could send the main index back to 6,250,” said Abbygayle M. Estrella,  an analyst at AB Capital Securities Inc.

Freya Natividad, investment analyst at Papa Securities, said the main index’s drop in the 6,300 territory opens up the possibility of a technical rally early in the week, before trades are dominated by overseas sentiments.

Week-on-week, the Philippine Stock Exchange index (PSEi) dropped  1.4 percent or 90.59 points to 6,391.24, ending its four-week rally. The decline was led by the service sector (-2.5 percent) and property (-1.7 percent).

Investor pessimism dominated the week due to continued political tension in Ukraine. On the economic front, world’s second largest economy China reported weak retail sales and factory output data for February.

Average turnover value eased slowed 29 percent to P7 billion. However, net foreign buying hit P645 million, reversing the previous week’s net selling of P186 million.

For this week, investors will look out for trading cues overseas.

“Whether the PSEi is poised to continue its decline or not, it will be difficult to defy the looming foreign data scheduled for the week,” Estrella said.

For instance, minutes of the second Federal Open Market Committee meeting for the year will be released while US Fed chair Janet Yellen will hold a conference on the current status of the world’s biggest economy.

“A new tranche of tapering could temper market sentiment given that the recent jobless claims reveal a more favorable labor landscape,” Estrella said.

For 2Trade-Asia.com, the local bourse will test its ability to stay above the 6,300 or 6,400 mark “as sentiment is likely to be clouded by the recent international headlines.”

Locally, investors will seek directions from economic managers’ briefing.

“Although we expect the main index to trek lower on weak indicators, we think that this is a healthy correction since it has kept its four-month long uptrend,” Estrela said.

Natividad pegged the support level at 6,350 and resistance at 6,500 while 2Trade-Asia.com’s immediate support is at 6,350 while resistance is at 6,450 to 6,470.

“Seek for dark horses with solid fundamental plans and backed by supportive management,” 2Trade-Asia.com said.

“We advise investors to wait for the main index to settle near 6,250 before accumulating,” Estrella said, adding that the market correction is necessary for the PSEi to propel back to 6,600 territory.