The local stock market has turned bearish after last week’s plunge but investors are not seen to jump in to pick up bargains this week as they are expected to remain on the sidelines amid an absence of positive catalysts.
“The local market declined last week by 2.07 percent. With its decline, the bourse has broken below the 6,400 level which was considered as a support,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that “the market’s 50-day exponential moving average has also gone below its 200-day counterpart forming a death cross which indicates the possibility of a downtrend moving forward. All in all, the market’s chart has shown bearish developments.”
A bear market is a downward trend in financial markets where share prices are continuously dropping, indicating a weakening economy and a loss of investor confidence.
Generally, a market is considered a bear market when prices have declined more than 20 percent. Bear markets can be as short as a few weeks or as long as several years.
While last week’s four-day decline is seen to have opened the door for bargain hunting opportunities, Tantiangco said, “the optimism needed for the market to rally is not yet seen. Investors are still waiting for positive catalysts, primarily one which would hint of monetary policy easing soon in the Philippines.”
“Hence, unless we see positive developments on the outlook of our interest rates, the local market may only move sideways with bargain hunting providing the upside force," he said.
“Downside risks including the less dovish outlook of the Federal Reserve and the sustained weakness of the Peso may continue to weigh on market sentiment,” Tantiangco added.
Online brokerage firm 2Tradeasia.com said that the Bangko Sentral ng Pilipinas has telegraphed a possible August rate cut, contingent on inflation improving in the second half of 2024.
However, the brokerage noted that “while first half 2024 inflation drivers have decelerated, uncertainty related to the impact of La Nina, utility rate “hikes, among others, remain valid impediments to any upward lift to sentiment.”
Thus, it advises investors that “sector-specific plays and remaining selective at corporate stories should be optimal in the medium-term, pending greater impetus that would bring volumes roaring back for the back half of the year.”
For stock picks, Abacus Securities Corporation advised investors to add shares of Citicore Renewable Energy Corporation if the price falls below its initial public offering price of P2.70 per share. The stock’s price closed at P2.69 a share last week.
The brokerage noted that CREC’s attributable operating capacity will grow more than tenfold over the next 12 months, underpinning its P2.88 price target.