|Opinion Issued on||Support||Resistance|
|Dec 1 2014||7260 / 7325|
A breach in the 2-month trend support following the 1.24% drop from the PSEi last Thursday is a signal that the market may be entering into a near-term bear market.
Given this, we see the near-term support and resistance at 7,260 and 7,325, respectively, with a failure to recover from the support breach affirming a short-term bearish bias with a downward target of 7,200.
Also, market liquidity has weakened following a combined PHP 33 billion worth of IPOs, FOOs and private placement in the months of November and December. The initial public offering of SSI Group, Inc. (SSI), Xurpas, Inc. (X)m and Phoenix Semiconductor Philippines (PSPC) contributed roughly one-third or PH 10 billion in value.
Meanwhile, Max’s Group, Inc. (MAXS) and Integrated Micro-Electronics, Inc. (IMI) are having a follow-on offering worth a combined PHP 5 billion while SM Prime Holdings, Inc. (SMPH) had a PHP 18 billion private placement this week to fund its investments in Ortigas.
Fundamentally, we expect full year GDP growth to miss the 6.5%-7.5% government target given the lower Q1 and Q3 GDP results.
The disappointing results as well as downward revisions of banks and economists may put negative pressure on equities in the next few weeks.