Bearish market sentiment expected this week

MANILA, Philippines - The bearish sentiment at the local stock market is expected to persist this week, analysts said.

“Corrective pressures are expected to persist this week as various technical issues increase the bearishness in the Philippine Stock Exchange index (PSEi). Prices need to stage a bounce and overcome resistance at 7,110 to confirm its higher low pattern and set up for a reversal,” said Luis Limlingan, managing director at Regina Capital.

He said since the trend bias this week is bearish, the odds of prices moving lower during intraday is higher and the lower the index goes, the harder it is to establish a support base.

“On the positive side, the index will see less volatile movements as five-day average true range decreased significantly during the last three weeks from 200 points to 76 points,” he said.

As such, he advised investors to take a cautious stance when buying issues.

Despite the bearish sentiment prevailing in the local bourse, April Lee Tan, head of research of COL Financial Group Inc. said this is only temporary.

“The Philippines is suffering from a major correction due to several factors locally and globally. Nevertheless, we remain confident the Philippines will eventually bounce back and stay in a bull market over the longer term as none of the characteristics of past bear markets are present today,” she said.

These factors include overheating of the local economy, high debt levels and high foreign borrowings such as in the 1997 Asian Financial Crisis.

“There is also a strong likelihood that we have already seen the low of this correction based on the magnitude and duration of major corrections in the past,” Tan said.

Justino Calaycay of Accord Capital, said investors may continue to stay on the sidelines.

“Investors are still mostly content on keeping to the sidelines — evidenced by the drop in average daily value turnover of only P6.074 billion, 22 percent less than the previous month’s average. And what with little participation we’ve seen, most are obviously trading on the sell side — evidenced by the two percent slide in the main index for the week and 2.6 percent  drop for the month-to-date. The weekly drop is the 7th straight while the monthly drop, if sustained through the rest of September, will be sixth,” he said.

He said at the close of the last week, investors were still close to being clueless when the trading week unfolded as risks emerged from all sides — and practically remained so the rest of the week.

Stock markets across the globe have reacted strongly to the unfolding Chinese events, he said.

Jason Escartin of F. Yap Securities said investors will continue to keep a close watch on the US interest rates decision.

“In the event of a liftoff, few big questions remain, such as the duration, the rate of the step-up and target rate. In the days leading to the decision, we expect markets to move lower, marked by bouts of increasing volatility,” he said.