Optimism to prevail after US rate hike delay


PHILIPPINE shares are likely to trade above the 7,000 territory on the PSEi given the positive sentiment infused by the Federal Reserve decision not to implement an interest rate liftoff.

Jason Escartin, investment analyst at F. Yap Securities Inc., said the optimism is likely to influence investors and give way to more buyers in the market.

“Optimism may buoy the market after the US Fed voted to delay its long-awaited interest rate liftoff, citing recent global and financial developments that could ‘restrain economic activity’. Slowing activity in China, plus the dollar’s strength contributed to weaken inflation to 1.8 percent below the 2 percent target giving the Fed more room to leave rates unchanged,” Escartin said.

Citing concerns over China, Escartin said the market may experience some weak moments but that the overall picture is positive in the short-term.

“By kicking the can further down the road, the FOMC (Federal Open Market Committee) has given markets more room for optimism, at least until the next summit. This will also give players a chance to assess risks vis-à-vis potential upsides,” he added.

Anton G. Alfonso, RCBC Securities Inc. research analyst, mirrored Escartin’s position, noting that “with the US Fed’s policy meeting out of the way… investors may now focus on the fundamentals of Philippine companies until the US Fed’s December policy meeting during which the market expects a marginal rate hike.”

The FOMC still has two meetings this year October 27 to 28 and December 15 to 16. Fed Chairperson Janet Yellen said their October meeting is a “live” one and they may call for an unscheduled conference should the committee decide to raise interest rates.

In separate weekly reviews, both BPI Asset Management and AB Capital Securities Inc. both noted the PSEi is likely to trade above the 7,000 level.

But BPI Asset wa rned that any “disappointing economic data from China will weigh on emerging markets, including the Philippines, despite the delay in the US rates liftoff and despite market expectations that the Bangko Sentral ng Pilipinas will not change its policy rates.”

AB Capital Securities Inc., on the other hand, sees a “bearish-neutral” trend this week with the delay in the Fed decision on interest rates.

However, the selling pressure from last week is on hand and may build up which indicates investors should be “cautious of index volatility” moving forward, said Luis Limlingan, managing director at Regina Capital Development Corp.

“We need prices to hold above 7,110 this week in order to keep the bullish setup intact and rally towards the 7,272 resistance. Otherwise, it is very likely that the index will suffer from corrections to 6,860 at a maximum,” Limlingan said.

“Also, we have to be cautious of index volatility as the weekly range expanded from 76 to 95 points, indicating sharper intraday moves. A cautious position is still raised this week, especially since some issues have already recovered above their long-term moving averages.

“On the other hand, we recommend taking profits on trading positions or sell those which are now trading near resistance,” he added.

On Friday, the PSEi eased gains to 0.11 percent or 7.92 points at 7,131.91 after hitting an intraday resistance of 7,210. The All Shares increased by 0.35 percent or 14.24 points at 4,076.60.


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