INVESTORS are going to be cautious as they wait for the decision of the Federal Reserve on raising interest rates after the Federal Open Market Committee (FOMC) meeting on September 16 to 17.
“For the week, we expect continued cautious and sentiment-driven trading as uncertainty remains over the Fed’s decision in its September FOMC meeting. The PSEi is expected to trade between 6,810 and 7,080 with a downward bias,” BPI Asset Management noted in a weekly review.
On Friday, the PSEi gained 0.26 percent or 17.84 points to 6,911.38, and the All Shares rose by 0.24 percent or 9.30 points to 3,963.65.
Jason Escartin, investment analyst at F. Yap Securities Inc., said that the global market including the Philippines will continue to experience volatility ahead of the FOMC meet, and even afterwards.
The minutes of the FOMC meetings are usually released three weeks later.
“Market players have been waiting for the US interest rate decision, a major move that could determine the fate of global markets. In the event of a liftoff, few big questions remain, such as the duration, the rate of the step-up & target rate. In the days leading up to the decision, we expect markets to move lower, marked by bouts of increasing volatility,” Escartin said.
The Fed will consider data releases in its decision, including the “solidifying labor trend and improving inflation” as well as the “developments in China, specifically its move to devaluate the yuan,” Escartin noted.
Corrective pressures are likely to prevail over the short-term, following the bearishness in the last few weeks, said Luis Limlingan, managing director at Regina Capital Development Corp.
“Prices need to stage a bounce and overcome resistance at 7,110 to confirm its higher low pattern and set up for a reversal. Take note however that since our trend bias this week is bearish, the odds of prices moving lower during intraday is higher and the lower the index goes, the harder it is to establish a support base,” Limlingan said.
On the positive side, the index will see “less volatile movements” this week compared to the earlier days as buyers will stay cautious likely on the sidelines ahead of the FOMC meeting, Limlingan noted.
Justino Calaycay Jr., equity analyst at Philstocks Financial Inc., said in a weekly forecast that investors prefer a wait-and-see stance even if prices point to bargain opportunities after the massive sell-off in the past few weeks.
“Didn’t the massive sell-off last month open bargain opportunities that would’ve, should’ve attracted bargain hunters with a long-term horizon?
“At this point it doesn’t seem so. Investors are still mostly content on keeping to the sidelines – evidenced by the drop in average daily value turnover of only P6.074 billion, or 22 percent less than the previous month’s average,” Calaycay said.
With the little participation from investors, mostly on the selling side, the main index will continue to trade sideways as investors wait for better signals before they decide on taking positions once again, he added.