PHL shares may drop further before US vote, Fed

PHILIPPINE SHARES could decline this week as cautiousness prevails ahead of the US presidential election and the US Federal Reserve’s policy meeting.

On Thursday, the benchmark Philippine Stock Exchange index (PSEi) dropped by 1.88% or 137.28 points to close at 7,142.96, while the broader all shares index fell by 0.98% or 39.37 points to 3,957.21.

This was the PSEi’s lowest close in more than six weeks or since it ended at 7,104.20 on Sept. 16.

Week on week, the PSEi declined by 2.34% or 171.27 points from the 7,314.23 close on Oct. 25.

Philippine financial markets were closed on Friday (Nov. 1) for All Saints’ Day.

“Caution and risk-off sentiment permeated most of the week’s trades ahead of the crucial US election and Fed rate decision,” online brokerage firm 2TradeAsia.com said in a market note.

“The local market exhibited bearish movements in last week’s trading, breaking below its 50-day exponential moving average and even the 7,150 support level as it extended its decline,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

For this week, negative sentiment may continue to prevail in the market, he said.

“We may not see a strong ascent yet as the market is still expected to deal with certain headwinds. The peso’s weakness, now already at the P58-per-dollar level, if sustained, is still expected to weigh on the market,” Mr. Tantiangco said.

On Thursday, the peso closed at P58.10 per dollar, climbing by 13 centavos from P58.23 on Wednesday. Week on week, the peso rose by 22 centavos from its P58.32 finish on Oct. 25.

“Investors are also expected to monitor the upcoming US elections, the results of which will have a big impact on the global economy. Investors are also expected to watch out for the Philippines’ October inflation data. An inflation print which falls within the Bangko Sentral ng Pilipinas’ 2%-2.8% forecast, especially one which is biased to the lower end, is expected to give sentiment a boost,” he added.

Mr. Tantiangco said the PSEi may retest the 7,150 level this week as its support, while its resistance it at 7,400-7,500 range.

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the market’s support at 7,000-7,050 and resistance at 7,600-7,800.

2TradeAsia.com placed the PSEi’s support at 6,800-7,000 and resistance at 7,500.

“Global marts are expected to hyper-fixate on Western events [this] week as guesswork on the US elections conclude just in the for the Fed to deliver what is expected to be its penultimate rate cut for the year,” it said.

“Expect funds to move into defensive positions as the next few weeks are rife with events that markets have to parse and digest, regardless of how supportive or adverse new data are to fundamentals,” the online brokerage added. — R.M.D. Ochave