PH SHARES WEEKLY OUTLOOK

Investors to consider GDP data, terror fears

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Share PRICES could be range-bound this week as investors stay on the sidelines following heightened terror fears worldwide and ahead of Thursday’s release of Philippine growth data.

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Likely to weigh on sentiment also is last week’s issuance of Federal Open Market Committee (FOMC) minutes supporting the possibility of a US interest rate hike next month—a key factor behind global market volatility this year.

“This week, we expect the market to trade range-bound ahead of the Philippine third quarter GDP print,” BPI Asset Management said, adding: “For this week, our expected trading range is 6,600 to 6,900.”

The Philippine Stock Exchange index (PSEi) gained 107.43 points or 1.57 percent to 6,932.81 on Friday while the All Shares index added 53.78 points or 1.36 percent to 4,001.22.

The bourse started last week with a nearly 2 percent drop to 6,772.92 in the wake of deadly terrorist attacks in Paris. It recovered after a two-day trading break called as Manila hosted the Asia Pacific Economic Cooperation Summit, taking cues from markets worldwide that shrugged off the Paris attacks.

With terror fears having spread to Brussels and New York and an extremist attack in Mali that left at least 19 dead, however, and analyst said investors could become more risk-averse.

“This series of unfortunate events creates a period of risk aversion, thus causing investors to stay in the sidelines,” said Jonathan Ravelas, BDO chief market strategist.

“In some cases, the tendency is for them to take profits or to stay in cash until the dust settles or a fresh new set of constructive news surfaces. In previous periods, it took investors four to six weeks to enter the markets anew,” he added.

Asked if a bearish attitude would prevail, Ravelas answered: “At the moment, I am expecting the PSEi to range between 6,800 to 7,000. It is no secret that my bias is a retest of 6,800 levels, if it breaks then 6,500 levels could be tested.”

“What could trigger this is a weaker than expected third quarter GDP figure. I am expecting a 5.9 percent growth,” he added.

The Philippine economy has grown below target so far this year, expanding by 5 percent and 5.6 percent in the first and second quarter, respectively, for a first half result of 5.3 percent.

The government has a 7 percent to 8 percent goal for the year but officials have admitted that the expansion could be limited to around 6 percent, also the market consensus.

This view will be tested with the release this Thursday of third quarter gross domestic product (GDP) growth data. Most bank estimates for the period range from 6 percent to 6.5 percent, while economists polled by the Manila Times expect the figure to fall within 5.8 percent to 6.5 percent.

Jason Escartin, investment analyst at F. Yap Securities Inc., said a short rally could follow the release of the GDP data but the local market would initially track developments overseas.

“After series of delays, [US] policymakers may finally be prepared to hike rates this December, as shown in the minutes of FOMC’s October meeting. This should reduce uncertainty over the medium-term, a scenario preferred by players who aim to manage their risk-return expectations,” Escartin said.

He noted that markets are also waiting for US employment data for November, which could affect the timing of a Federal Reserve rate hike.

“Some optimism has been seen on bets for robust economic growth in third quarter of 2015. Local equities may enjoy some gains in the run-up to the release of GDP data, expected on November 26, Thursday,” Escartin said.

“After which, some profit-taking may occur as news is factored into share prices. More importantly, drivers of GDP growth, particularly government spending, will be scrutinized for sustainability,” he added.

He said the short term trading range would be between 6,850 to 7,050 before some jumps towards the yearend that could push local equities up to the 7,200 level.

“For now, the PSEi is still a long way from testing relevant resistance levels such as its simple moving averages. The closest may be the 7,000 mark, which could easily be breached, based on recent history,” Escartin said.

“Barring unforeseen negative jolts abroad, some of catalysts … for the remainder of the year include seasonal window-dressing, improved consumer spending during Yuletide holidays and relatively higher quarter-on-quarter earnings for the fourth quarter,” he added.

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