Earnings, inflation data to dictate market direction


Corporate earnings results and the release of July inflation numbers will dictate the direction of the local market this week, with shares likely to continue moving sideways until stronger incentives emerge.

Share prices trudged sideways last week and ended flat as investor optimism over the ongoing earnings season was “challenged “ by the Chinese Ghost Month, higher interest rates and outside market forces, said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

The Chinese consider the “Ghost Month” an unlucky period to start a new business or make an investment, and since it falls in late July to August, it also coincides with Western fund managers going on summer break, resulting in lean trading volumes in global stock markets. This year the “Ghost Month” started on July 27 and will end on August 24.

“Generally flat—that is probably the most apt way to describe the market’s movement, not only in the week just concluded but since mid-July,” Calaycay said, noting that the Philippine Stock Exchange index (PSEi) has been trading in the 6,850 to 6,900 range after peaking at the 7,000-mark last July 7.

Calaycay said the market will be riding on the trend of the July inflation numbers to be released on August 5, the bulk of earnings “as we approach the second week of August,” as well as the release of the country’s gross domestic product (GDP) data by the end of the month.

He added that underlying indicators show “some degree of optimism—things could be improving in the days and weeks ahead.”

“The PSEi will continue to test the 6,900 levels. Earnings will be the key to sustaining closes above the line. On the other hand, unless drastic and unanticipated developments crop up, the measure appears solidly holding the 6,830 to 6,850 support range,” Calaycay said.

Joyce Anne Ramos, investment analyst at AB Capital Securities Inc., said in a separate weekly market report that shares are expected to “continue moving sideways” due to the Ghost Month effect, while volume is seen to inch up slightly “as market participants take their positions, taking into account the surge of released data” —inflation, earnings and GDP numbers.

“As previously mentioned in the earlier reports, the release of the second quarter corporate earnings will guide the market participants on whether to push the market back to and past the 7,000 level or not,” Ramos said.

On the other hand, F. Yap Securities’ Jason Escartin said investors may take their cue from markets abroad at the start of trading on Monday, “although possible ‘relief rallies’ from Wall Street could help revert buying interest in equities.”

Escartin said Monday’s trade will rely on earnings and results from foreign markets, as skeptics wait for Tuesday’s release of the July inflation figures.

On Friday, the benchmark index gained 29.41 points or 0.43 percent to finish the week at 6,894.23, while the broader All Shares index firmed 11.13 points or 0.27 percent to close at 4,123.69.

Kristyn Nika M. Lazo


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