The PSEi is likely to stay bearish as investors take a wait-and-see stance ahead of the Federal Reserve’s decision on whether or not to raise interest rates in the world’s largest economy.
Online brokerage firm 2TradeAsia.com is betting the market adopting a “sideways to downward bias trend … until a certain decision from the Fed meeting arises.”
The company is speculating a “lesser chance” of a lift-off this month as the data-dependent Fed may likely consider the latest August non-farm payroll data, which fell short of expectations. “We believe that with Fed’s decision of being data dependent, there would be lesser chance for it to feel the sense of urgency in raising interest rates.
“Note that, however, the Bank of Japan (BoJ) is also set to have its meeting on September 21 and uncertainty is budding as policy makers are still divided whether to reduce their easing policies or to make its bond-buying program more flexible,” it added.
The Fed’s policy meeting is scheduled on September 20 to 21.
Luis Limlingan, managing director of Regina Capital Development Corp. noted the market will stay along a corrective path despite some bargain hunting in oversold stocks.
After surging 2.15 percent on Thursday session, the PSEi lost 2 percent on Friday.
“Last Friday’s reversal gave us a clear indication that the corrective pressure on PSEi is still too strong that any rallies should be used to unload positions. [The] 7,500 [level]will be tested for the second time in two weeks, making it a crucial level to watch out – the success or failure of this support test will greatly influence our trading strategy for the next two to three weeks,” Limlingan said.
Markets will be “choppy” this week as “investors continue to speculate on the upcoming Fed rate hike.”
While a Fed rate hike may have a negative impact on markets, the move to raise the rates would favorable in the long run as its signals improving economic activities, said Justino Calaycay Jr. of A&A Securities Inc.
“Alternatively, a move in the opposite direction, such as raising rates or reducing stimulus, suggests the real economy has gained sufficient traction to stand on its own. While initially this is negative for stocks, in the long run, normalized rates will further boost corporate margins and bottom-lines, which in turn will equally be good for stocks,” Calaycay said.
“At the end of the day, it is a question of whether the markets will continue to be “liquidity-driven” or one that is based on the underlying fundamentals of individual firms as well as the general economy and its sectors,” he added.
On Friday, the bellwether PSEi fell by 2.006 percent or 154.66 points to 7,553.76, while the wider All Shares decreased by 1.21 percent or 55.83 points to 4,558.17.