Shares are seen as vulnerable to further sell-offs this week as the weakening of the local currency past the psychological level of 50: $ 1 improved the appetite of foreign investors.
The major stock of the Philippine Stock Exchange Index (PSEi) fell a total of 167.34 points or 2.39 percent last week as it ended Friday at 6,834.92.
On the other hand, the peso weakened by 1.79 percent to close P50.08 against the US dollar as demand for greenback rose along with the recovery in imports.
Local stocks would remain weak amid renewed overseas sales, said Manny Cruz, chief strategist at local stockbroker Papa Securities.
“The weakness of the local currency against the US dollar prompted foreign funds to sell local equities and convert to the US dollar,” Cruz said.
“We are looking at support at the 6,600 level, which could be a decent level to position in the market given the improved economic outlook,” he said.
Cruz said the pandemic appeared to be under control now in the Philippines, as indicated by the decline in new COVID-19 infection rates in the National Capital Region.
Elsewhere in the Asia-Pacific region, however, tremors have escalated amid threats from the more contagious Delta variant.
In a research note from July 8, JP Morgan noted that while the rate of vaccination increased in emerging markets, the rollout did not appear to be enough to offset transmission rates in some countries. It said that the Philippines, Peru, Colombia, South Africa, Thailand and Mexico seemed “most vulnerable” to the Delta variant.
The Philippines was quoted as being among the countries that could be put under pressure to tighten restrictions further.
BDO Unibank’s chief strategist Jonathan Ravelas said new COVID-19 variants overshadowed global growth expectations, dampening domestic investors’ feelings about the country’s recovery prospects. This prompted investors to capitalize on their gains from the previous week’s rally, Ravelas said.
Last week’s close at 6,834.92 highlighted the market’s vulnerability to sales despite the recent high of 7,064.24, Ravelas said.
“Continue to expect the market to be between 6,700 and 7,000 levels in the short term. However, a sustained fall below 6,700 levels could signal that the market could try 6,300-6,500 levels and re-ignite the bears to play, ”he said.
At the exchange rate, a sustained break above the P50.50 levels could next test the P50.70 to the P51 levels against the US dollar, Ravelas said.
—DORIS DUMLAO-ABADILLA INQ
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