PSEi to move sideways this week

Local shares are expected to move sideways this week as investors continue to weigh the impact of continuing quarantine measures that restrict many sectors to limited operations.

The Philippine Stock Exchange index (PSEi) closed Friday’s session up 12.23 points or 0.21% to 5,785.09. But on a weekly basis, it went down 1.68% or 99.09 points.

Value turnover last week fell 34% to an average of P5.99 billion, but net foreign selling was trimmed 3% to an average of P946.36 million.

Last week’s trading was cut to four days due to a holiday for National Heroes’ Day on Monday.

“Weakness reigned, with not enough positive catalysts at home to nudge the bellwether higher. Investors weighed-in on the (lockdown) extension in Metro Manila, and on the release of labor numbers for July,” online brokerage 2TradeAsia.com said in a market note.

The government announced last week that existing quarantine protocols in Metro Manila, which restrict several business sectors to limited operations, will be extended for the whole of September.

This means sectors that facilitate a heavy volume of people, such as construction, entertainment, tourism and accommodation, and food services, would have capacity limitations of 30-50% even in the least restrictive quarantine protocols, 2TradeAsia.com noted.

“This highlights the critical need for (local government units) to revert to quarantine-free — not just relaxed quarantine — policy to fast-track recovery of the labor market,” the brokerage said.

This concern was on one end of investors’ considerations, while on the other end was the improvement of labor data for the month of July. The government reported last week that unemployment in July was reduced to 4.6 million from a record 7.3 million in April.

“Recall that labor directly feeds into (gross domestic product), and sentiment will remain glued on whether the recovery can remain steady-state until the next survey in October,” 2TradeAsia.com said.

For the coming week, the PSEi is seen to move within the 5,500 to 5,800 range barring any shocks or surprises, PNB Securities, Inc. President Manuel Antonio G. Lisbona said.

“The primary driver for strong upward move will be positive developments on a vaccine or treatment or strong evidence that infection rates have gone down. Drivers for strong downward move: US election uncertainties, sustained decline in US markets, anti-COVID-19 vaccine delay and evidence of rising cases,” he said in a text message.

US markets ended lower on Friday’s session, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite indices all losing 0.56%, 0.81% and 1.27%, respectively.

2TradeAsia.com is putting immediate support for the PSEi at 5,500 and resistance within 5,800-6,000. By Denise A. Valdez, Senior Reporter|BusinessWorld

Source: Peso Economics