PH SHAREs WEEKLY OUTLOOK

Downward bias amid geopolitical concerns

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Local stocks are expected to move sideways with a downward bias this week as geopolitical issues weigh heavily on investors’ minds, along with volatile currencies and equity markets overseas.

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Rafael Supangco of Angping & Associates Securities said he expects more selling to take place within the week, observing increased foreign selling due to a lack of catalysts to lift the market.

“I think that with no strong catalysts present, the market is likely to trade sideways within the week, more on a downward bias,” Supangco said.

“Resistance is still at 7,000 [points]while support is at 6,820,” he added.

Justino Calaycay of Accord Capital Equities agrees with this view, saying that the market will likely endure consolidation at this point.

“It’s going to consolidation. We expect sideways movement, with support to focus at 6,800 to 6820,” Calaycay said.

Friday’s trading was jittery after US President Barrack Obama authorized air strikes against Iraqi militants, dragging the Philippine Stock Exchange index (PSEi) down 74.87 points or 1.08 percent to 6,880.34, while the broader All Shares index also fell 37.40 points or 0.90 percent to 4,129.40.

Jason Escartin, investment analyst at F. Yap Securities Inc., said that the week might still mirror Friday’s losses as investors watch out for more updates on geopolitical news around the globe.

“Volatility is emphasized. Apart from local equities’ flat turnover (-1 percent week on week), reversals in net foreign selling for equities will continue to be monitored. Note that tension within the geopolitical terrain is still in the spotlight, given its impact on currencies’ movement and trade flows,” Escartin said.

“Quarter-on-quarter improvement in corporate earnings will be assessed, but most are bound to validate second-half prospects. This will cover capex [capital expenditures]rollout, with special emphasis on timely project completion” especially for real estate, construction and holding firms, he said.

“Meanwhile, sellers are likely to cash in on rallies with an expected slower third-quarter season, as buyers bid for time within the ‘Ghost Month’ period. It would be prudent to spot good entry levels in issues that are likely to be near-term favorites, as some reposition their portfolio basket,” he added.

The Chinese consider the “Ghost Month”, which this year falls on July 27-August 24, an unlucky period to start a business, get married or engage in a new investment. Since it also coincides with the annual summer holiday of most Western fund managers, global stock markets usually see very thin trade during this period.

Escartin said for Monday’s trade, investors will likely track foreign events and markets and wait for market-moving news given the volatile currency and crude futures markets.

Net foreign selling expanded to P594 million from P46 million last week while the Philippine peso fell to its lowest level in three months, hitting 44.28 to the dollar before closing at P44.13 on Friday. The peso was also the biggest loser among Asian currencies on the day, along with the Thai baht.

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