Market seen holding support at 6,400

MANILA, Philippines — Risk-off sentiment turned off investors last week and turned out to be bad for the Philippine stock market.

The benchmark Philippine Stock Exchange index (PSEi) fell by 120 points to 6,469, down 1.82 percent, week-on-week.

Average value turnover jumped to P11.69 billion while average net foreign selling widened to P5.5 billion, versus P8.7 million the prior week.

The global risk-off sentiment was due to the US banking industry’s problems which caused volatile trades across capital markets.

Unicapital Securities said there was a “deepening negative sentiment in the banking sector because of Silicon Valley Bank’s collapse and Credit Suisse’s liquidity issue.”

“Domestically, the issue raises concerns over the pace of interest rate hikes affecting the financial sector and possible contagion risks of a Credit Suisse collapse. Overnight developments show that Credit Suisse has tapped the Swiss National Bank for a $54-billion credit line to address its funding issues, with its share prices finding a relief rally and arresting the probability of a collapse,” Unicapital said.

In relation to this, Unicapital said, the PSEi is expected to find support at the 6,400 levels.

2TradeAsia, for its part, said banks and bank-adjacent sectors would continue to come under the microscope, as investor attention shifts to credit and liquidity.

“Some consolidation plus stricter regulations in the sector may cause chaotic price gyrations, but hegemons in this space should come out relatively unscathed. While the market is quite far from being its sterling, peaking self in 2017, it is neither resembling its finance crisis of 2008, at least so far,” it said.

2TradeAsia said most local banks have zero exposure to troubled US banks.

“It also helps that most are also backed by parent company conglomerates that are well capitalized, which should provide reassurance that local banks have some cushion for possible bank runs,” it said.

Against this backdrop, immediate support is seen at 6,300 with resistance at 6,600.