Investors will try to grapple with uncertainties this week on how the the Federal Reserve will react to the latest job data in the world’s largest economy and how the Philippine government will support its fiscal spending program among other urgent matters.
Luis Limlingan, head of research at Regina Capital Development Corp., sees volatile trading ruling the market in the next two weeks. The technical and fundamental aspects of the market are keeping investors on the edge until they get clearer signals on both fronts.
“The first two trading days will be crucial for the index as it needs to sustain its hold above 7,800 to prevent another round of correction back to its 100-day moving average. However, given its overall bearish signals, our trend bias this week remains highly bearish unless prices rally above the 65-day moving average (currently at 7,840) with volume support,” Limlingan said.
Despite expectations of short-term volatility, 2TradeAsia.com is keeping its fingers crossed and hoping that the market would still defy its downtrend.
“Investors, in our view, will continue to monitor the local government on how it will fund the national budget and what tax policies will be implemented, to generate enough revenues for next year,” it added.
Over the weekend, the US reported 151,000 jobs were created in August – below market expectations of 180,000.
“As such we recommend a cautious buying strategy, especially for issues that have already reached oversold conditions. Issues stabilizing at their respective support bases are good buys for the week while we advise avoiding issues that are currently trading in a strong downtrend,” Limlingan noted.
“For the next one to two weeks, the index needs to establish a fresh higher low base to initiate a rebound towards 7,900 to 7,950 levels. Failure to do so may put prices in a more bearish scenario,” he added.
The main PSEi rose by 0.44 percent or 34.11 points to 7,807.42 on Friday, helped by a bit of bargain hunting.
Developments this month will add to the market volatility, according to 2TradeAsia.com.
“Expectations are already mounting on the likelihood that the Federal Reserve will raise rates before the end of the month, not to mention the policy meetings of other developed economies. Note that this will still largely depend on the US jobs (data). Although we believe the decision has already been factored into share prices, we still expect capital flight to continue, evidenced by the net foreign selling of P1.9 billion registered last week,” the online brokerage noted.
“Nevertheless, investors should also consider talks and meetings in other developed economies and organizations, predominantly from the Bank of Japan (September 20), European Central Bank (September 8), Bank of England (September 15), and Organization of the Petroleum Exporting Countries (September 26 to 28), as these could weigh on the Fed’s decision. Meanwhile, uncertainties in the outlook for oil prices may linger as major crude producers express their willingness/unwillingness to participate in the output freeze talk by end-September,” it added.