MANILA, Philippines - The Philippine Stock Exchange index (PSEi), is seen testing the 6,600 level after a strong rally last week following a string of good news such as the Bank of Japan’s (BOJ) move to cut interest rates and the better-than-expected economic growth in the fourth quarter of 2015.
“A string of good news encouraged buying in the market. Optimism in the Dow Jones Industrial Average, reports of the US Federal Reserve ruling out a rate hike this quarter, a rebound in oil prices and the BOJ’s rate move fueled the run. More investors are wearing a smile nowadays,” said Astro del Castillo, managing director of First Grade Finance Inc.
The BOJ slashed interest rates to -0.1 percent to stimulate the economy.
Del Castillo said this week’s trading would be “less nerve wracking.”
Jason Escartin of 2TradeAsia.com said the benchmark PSEi could test 6,600 but noted that a retracement toward 6,550 is also possible.
“Immediate resistance is 6,700 to 6,730,” Escartin said.
He said prospects for the week would be data-dependent and could add more gyration on funds flow movement.
“For now, institutional investors are on the lookout for significant catalysts to reverse the general weak trend, especially with elections coming in this year,” he said.
At the same time, Escartin said caution should be exercised on intra-week spikes, ahead of China’s Lunar New Year holiday on Feb. 8.
For the week’s trading session, Escartin said investors would keep a close watch on data from China and developments in the global oil industry.
“This week’s focus is on the efficacy of standing policies, particularly China and oil. China’s manufacturing might indicate a shrinking manufacturing sector, a possible catalyst for retracement. On the other hand, oil prices recovered on rumors of Russian proposals to Saudi Arabia to launch a concerted effort to cut production. Prospects for oil in the coming week will hinge on further confirmation of these rumors,” Escartin said.
In general, however, the performance of the PSEi is expected to remain weak in the first half of the year as the challenges encountered in last year extend into 2016.
These challenges include the disappointing earnings of listed companies, the continuous weakness of the Chinese economy, and the US Fed’s divergent monetary policy, making it difficult for the Philippine stock market to fight contagion, according to financial services provider COL Financial.