Share prices could fall this week after latest US jobs data underscored the likelihood of a Federal Reserve rate hike before the end of the year, which is expected to lead to a flow of capital from emerging markets.
“Friday’s US payrolls data removed some uncertainty surrounding the Fed’s indicative rate hike this December … Over the short term, price appreciation in local trades may be capped by the Fed’s anticipated rate hike,” said Jason Escartin, investment analyst at F. Yap Securities Inc.
Amid the projected short-term weakness, Escartin said there would be “buying windows” depending on the final wave of third quarter earnings reports this week.
“Short-term plays based on earnings announcements may continue to persist, with a slew of PSEi [Philippine Stock Exchange index] component firms set to release their results this week,” he said.
Escartin also said the benchmark stock index would likely trade with a downside bias as it failed to hold to the 7,200 support level last week.
“Based on chart pattern, the PSEi is poised to test support at 7,070 to 7,080 points … Note that PSEi has broken below the 7,180 to 7,200 support zone. While far away from clear bargains below 7,000, it still can provide some room for comfortable gains,” he noted.
AB Capital Securities Inc., meanwhile, said in its weekly market review that the PSEi would “remain neutral-bearish” this week, seeing support at 7,070 and possibly going as high as 7,200. Topping this, it said the market could hit 7,400.
For its part, BPI Asset Management said: “This week, we expect the market to continue to be guided by the earnings results of local corporates. Key economic data from both local and the US may also drive the direction of the market. For this week, our expected trading range is 7,000 to 7,200.”
Philstocks Financial Inc equity analyst Justino Calaycay Jr., who echoed sentiment on third quarter earnings, was cautious of developments overseas.
“Very little lead was provided by the US market’s Friday session where the Dow rose 47 points but the broader S&P 500 ended flat. Earlier comments from Federal Reserve Chair Janet Yellen that a December lift-off is a ‘live possibility’ have raised the ante on the much-anticipated and waited-for [Fed rate] tweak,” Calaycay said.
“Meanwhile, the domestic earnings cycle stirs up even more … the results have not been convincing enough so far. Roughly 30 or so listed companies have filed their statements for the third quarter and the aggregate year-on-year profits show an 8 percent decline,” he noted.
On Friday, the bellwether PSEi slid by 0.06 percent or 4.25 points to 7,118.20, while the All Shares index likewise fell by 0.12 percent or 5.02 points to 4,103.47.