Shares to move sideways on thin trading volume

LOCAL EQUITIES may continue trading sideways this week as foreign investors maintain their selling positions, alongside the closure of some Asian markets for the Chinese New Year.

The 30-member Philippine Stock Exchange index (PSEi) gained 0.16% or 14.33 points to end at 8,612.44 last Thursday, closing the shortened trading week with a gain of 108.75 points or 1.3%. 

The increase was supported by the mining and oil and holding firm sectors, which closed 2.5% and 2% higher week on week, respectively. The market still held a net foreign selling position for the week at P810 million, although lower than the P940-million net outflows from the week before.

“I am convinced that the market will continue to trade sideways as we build up trading volume and wait out the continued foreign selling. There are several trading gaps to be filled on the way up to retest the 9,000 level which I think we will see in a few weeks,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a report.

Online brokerage 2TradeAsia.com, meanwhile, said trading could thin this week on account of the Chinese New Year.

“Volumes could thin ahead of China market’s week-long celebration of their Lunar New Year,” 2TradeAsia.com said in a weekly market note. The Shanghai Stock Exchange has been closed since Feb. 15, and will resume operations on Feb. 22 after the new year celebrations.

The brokerage also noted that investors will be seeking clarity on tariff rules, following the government’s petition to reverse the High Court of Singapore’s arbitral ruling on water tariffs involving Maynilad Water Services, Inc.

The arbitral ruling ordered the government to compensate Maynilad for its revenue losses since March 2015 after the Metropolitan Waterworks and Sewerage System refused to implement Maynilad’s tariffs.

“Cycle of legal brawls could send confusing signals to upcoming big-ticket projects, given the time element involved in recovering investments. Similarly, issues hounding the energy sector should also merit priority, as uncertainties on power supply agreement approvals could hamper existing players’ ability to support their operating cash flow needs,” 2TradeAsia.com said.

Speculations on what company will be the third telecommunications player also boosted prices of telco firms, specifically Now Corp., doubling its value to P13.98 from just P7.20 last week. Eagle Equities’ Mr. Mangun noted that there may be more trading among these speculative stocks.

“I also believe we will continue to see more action in second tier and speculative stocks in the following weeks as we wait for blue chips to pick up… Regardless if (NOW) turns out to be the third telco operator or not, the stock has shown to be a favorite among investors as it traded several billion this week, overshadowing the blue chips,” Mr. Mangun said.

Mr. Mangun placed the index’s support between 8,420 to 8,500, while resistance will be between 8,685 to 8,770. — Arra B. Francia