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Shares to move sideways on cautious sentiment

By Angelica Y. Yang

PHILIPPINE SHARES are expected to move sideways this week, with investors seen remaining cautious as they wait for more firm signs of economic recovery.

The bellwether Philippine Stock Exchange index (PSEi) closed Friday’s session at 7,238.46, climbing by 34.69 points or 0.47% from the previous trading day.

Week on week, however, the benchmark index inched down 0.71% or 51 points.

The market’s average value turnover declined 1.22% week on week to P10.5 billion, while average net foreign selling dropped 85% to P40 million last week.

AAA Equities Head of Research Christopher John Mangun said in a market note that he expects local shares to move sideways this week.

“We are expecting the PSEi to continue moving sideways between its psychological support of 7,000 and resistance at 7,300 in the coming week. Investors are comfortable with current blue chip valuations, but are hesitant to buy any higher until more signs of economic recovery come to light,” Mr. Mangun said on Sunday.

He added that imports and exports are expected to continue declining after peaking in September, while gross domestic product (GDP) likely continued to contract by up to eight percent year on year for the fourth quarter.

“We are not seeing the surge in new COVID-19 (coronavirus disease) cases, which most expected after the holiday season. There is a slight uptick, specifically in Central Visayas. However, it is not significant enough to be a cause for alarm. This may be one of the reasons that the PSEi has remained above 7,000,” Mr. Mangun said.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in an e-mail that the market corrected on Jan. 15.

“Offsetting positive local major factors include new COVID-19 vaccine supply deals for the Philippines and the latest affirmation of the country’s credit ratings by Fitch despite the COVID-19 pandemic,” Mr. Ricafort said on Friday.

Meanwhile, online brokerage said in a market note that market sentiment remained weak due to uncertainty over the tightening of restrictions following news about the first local case of the new COVID-19 strain.

“This may reinforce range-bound sessions (strong resistance at 7,300-7,500) until clearer rules for February and March get announced, which will coincide with the fourth quarter earnings season,” the brokerage said on Friday.

“The lower visibility for stronger recovery stories might also explain extra attention on second and third liners, especially those with M&A (mergers and acquisitions), SRO (stock rights offering). and expansion angles,” added.

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