Bearish trading expected this week

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© Edd Gumban, file Bearish trading expected this week

MANILA, Philippines — Local stocks are seen trading with bias on the downside this week, with investors expecting an extension of the enhanced community quarantine to contain the spread of Covid-19.

The Philippine Stock Exchange index (PSEi) fell for the third straight day last Friday, posting a 1.6 percent or 102.46 point drop to close at 6,443.09. This was among the lowest in five months or since November last year.

Week on week, the decline was 101.54 points or 1.6 percent.

Since the start of 2021, the PSEi has declined 9.8 percent versus 7,139.71 as of end-2020.

The PSEi’s immediate resistance is seen at 6,600 to 6,700 level, which are the next hurdles prior to further upside in the near future, said Michael Ricafort of Yuchengco-owned Rizal Commercial Banking Corp.

The immediate major support over the past five months remain at 6,400 levels, which help prevent further downward correction toward the 6,000 to 6,200 levels.

Ricafort said these levels have been the strong support levels since the fourth quarter of 2020.

Since the start of 2021, the PSEi has declined 9.8 percent versus 7,139.71 as of end-2020.

Ricafort said several factors affected the market’s behavior. These include the possible extension of the lockdown and stay-at-home orders.

“Any extension of the lockdowns or stay-at-home orders in NCR Plus in an effort to help reduce new COVID-19 local cases from record highs on a daily basis recently could result in significant reduction in production, sales, net income, livelihood, and valuations, especially by hard-hit businesses, industries and sectors,” Ricafort said.

Ricafort, however, cited some factors that could boost market sentiment. These include the CREATE Law, which was signed into law on March 26, and the progress on the Biden’s administration’s plans for additional US stimulus and infrastructure spending worth about $2 trillion.

The Create law will outrightly reduce corporate income tax rates by at least five percentage points, thereby resulting in a corresponding increase in net income and valuations of some listed companies.

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