PH SHARES WEEKLY OUTLOOK

No big shake likely this week

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Local share prices are likely to slowdown early in the week as investors have become cautious ahead of the most awaited Federal Open Market Committee (FOMC) meeting that would decide whether to delay the upward adjustment in its key interest rates or not.

Alexander Adrian Tiu, senior equity analyst at AB Capital Securities Inc., thinks that a pull back is expected, as the Federal Reserves’ decision on the rate hike approaches.

“I think we might see a bit more pull back as the rate hike [decision]approaches, and a possible bump after the rate hike on Tuesday,” he said.

The decline of the Philippine Stock Exchange Index [PSEi] last week, he said, was partly due to profit taking and that the main index standing slightly overvalued. Investors, he added, are also risk averse ahead of the FOMC meeting.


Tiu expects PSEi to fluctuate within 7,300-7,600-range this week.

Last week, PSEi fell by 0.06 percent week-on-week to close at 7, 509.94, with average total value turn over reaching P8.31 billion.

Gainers still outnumbered losers 112 to 102 while 32 issues remained unchanged. The mining and oil sector registered the highest increase (5.33 percent), followed by the services sector gaining 3.30 percent

Meanwhile, Justino Calaycay, head of research and sales at A&A Securities Inc. said that the stock market has already factored in the effect of the forthcoming FOMC meeting.

So, in his view, what will really move the market is the US Federal Reserves pulling a surprise and going against the expectations and increasing its rates.

Nonetheless, he noted that PSEi is now “violating” the traditional trend that whenever key interest rates adjust upward, the riskier assets such as the equities market suffer.

“We are now in the period where the usual causal relationship that we were used to—i.e., the equity market rallies that is followed by a fall in the bond market and vice-versa—is now being violated. At one point, we ran up for four consecutive days even almost hitting the 7, 800-mark, so there has to be some pause,” Calaycay said.

He thinks that the Fed should be moving its rates up—if not this week, “it should be soon.”
“Equity investors have become more prudent and cautious in their respective positions, and that still stands this week,” Calaycay said.

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