PH SHARES WEEKLY OUTLOOK

Investors to stay on sidelines ahead of fresh US, China news

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Stock market trading this week is expected to be driven by overseas news, particularly developments in the United States and China.

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BPI Asset Management, in a market review, said the Philippine Stock Exchange index (PSEi) would likely be range-bound during a shortened trading week beginning Tuesday.

Philippine markets are closed today for the Bonifacio Day holiday.

Investors, BPI Asset Management said, are expected to stay on the sidelines ahead of a US Federal Open Market Committee (FOMC) meeting on December 15 to 16, during which interest rates could finally be increased.

“This week, we expect the market to trade range-bound as market players await fresh catalysts and as investors move stay on the sidelines ahead of the December FOMC meeting. For this week, our expected trading range is 6,800 to 6,950,” BPI Asset said.

Jason Escartin, investment analyst at F. Yap Securities Inc., mirrored the same sentiment, saying the domestic stock market would be in “wait-and-see mode” ahead of the US interest rate hike. Investors, he added, will be looking at developments on a crackdown on brokerages in China, which led to a sell-off in regional markets.

“US employment data due Friday may very well put another nail in the coffin of low interest rates. While the Fed already hinted [that]delaying the hike would have considerable downsides, a December rate increase is still no certainty,” Escartin said.

“What’s definite is that policymakers are cautious. The latest FOMC minutes reveal there is no consensus for a 25-bps (basis point) rise, which suggests the trajectory of subsequent rate increases will be subject to data. Friday’s report will be crucial for policymakers as a better-than-expected picture in the labor market could support the case for a fairly moderate hike,” he added.

Last Friday’s regional sell-off, Escartin said, “ could set the tone early this week. China’s policy action has been fairly assertive relative to the US, which yielded mixed results.”

“The nation’s latest manufacturing gauge could prime markets to expect some response from authorities, a scenario that may temper pessimism in the region,” he added.

Escartin said the PSEi could head to a support level of 6,870 with a 7,070 resistance, but in case of “short-lived” pessimism over China “there could be opportunistic buying that might aid the market towards year-end window-dressing.”

Nisha Alicer of DA Market Securities Inc., meanwhile, said the market was “rangebound in a downtrend” given observed capital outflows.

“[The] market can remain … tepid … as investors stay on the sidelines amid uncertainty on the US Fed rate decision and lack of catalysts, as well as investors turning their attention towards the holiday festivities,” she said.

“We are still managing to hold, however, the support level of 6,600 to 6,800 considering the positive fundamentals of the country, although the sentiment is not exciting,” Alicer added.

On Friday, the bellwether PSEi dropped 136.18 points or 1.93 percent to 6,927.07 while the wider All Shares index lost 59.69 points or 1.47 percent to 3,996.91.

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