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Analysis and Recommendation
The inflow of foreign investments to stocks and bonds declined by 43% month-on-month (MoM) to US$713 million in April. Hot money going into the PSE halved to US$408 million while hot money going into Philippine bonds declined 31% to US$304 million.
Selling flows from abroad declined month-on-month, albeit at a slower pace of just 20%. This led to a net foreign investment outflow of US$352 million for the month of April.
Our View: The hot money data just sums up the incessant foreign outflow we’ve been seeing for the majority of the year. The total net foreign outflow currently sits at P25.6 billion vs. P18.8 billion last year.
Doubling down on this data, total market activity has declined by almost 10% to P701 billion year-to-date vs P636 billion last year. Needless to say, the PSEi really needs a strong catalyst to jolt market participants into action.
The PSEi is virtually flat for the year and currently sits in an awkward zone between 6,700 to 6,400. In the very short term, 6,523 – 6,500 will be a key level to watch for the market as a decline below this level will soon see a retest of 6,400 which may eventually see the index lower towards 6,200.
Watching the following names to get a hint on the likely next big move of the PSEi: ICT, ALI, JGS, TEL and SM. These stocks are sitting dangerously above key support levels and a break of which will pull the market along with it.
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