SHARES WEEKLY OUTLOOK: Cautious action on the upside ahead of key PH, US data

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Philippine shares may trade higher this week on the back of quarter-end window-dressing, but the mood could change quickly with investors turning cautious ahead of the release of key economic data at home and overseas.

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“There may be some action on the upside as investors bank on the traditional window-dressing mode that mark these end-of-period trades,” said Justino Calaycay, analyst at Accord Capital Equities Corp.

Window-dressing is a strategy used by fund managers to improve their portfolios near or at the end of the quarter by buying high-flying stocks and selling those that have performed poorly.

For his part, First Grade Finance Inc. managing director Astro del Castillo said market participants will continue to be on the lookout for fresh leads both here and abroad, particularly with key economic data due for release during the week.

“This week, we only have one trading day left for this month. Investors will be watching out for more fundamental news. Inflation [data]can dictate the direction of the local market,” del Castillo said

The country’s official inflation data for June is set to be announced on Friday, July 4.

Consumer prices, which grew 4.5 percent in May, are now seen almost certain to hit the upper boundary of the government’s 3-percent to 5-percent target band, despite central bank reassurances that recent spikes in food and transport costs were due to temporary rather than systemic factors.

A number of analysts surveyed by The Manila Times forecast that inflation in the third quarter will be near the 5 percent upper limit set for this year, largely driven by those same food price pressures.

Overseas, US markets are expected to see some swings this week with a raft of economic data due out on Thursday, including the nonfarm payroll figures for June, the May trade deficit and the June index on the services sector from the Institute for Supply Management, Reuters reported.

Additionally, US Federal Reserve Chair Janet Yellen will be speaking on financial stability at an International Monetary Fund conference in Washington midweek, which should add to investor caution. Local stocks ended last week’s trade in the red as investors opted to take profit following a five-day rally, apparently spooked by remarks from a Federal Reserve official that the United States could raise interest rates as early as March next year.

Foreign wire reports said James Bullard, president of the Federal Reserve Bank of St. Louis, has predicted the US central bank will raise interest rates starting in the first quarter of 2015. Bullard is a non-voting member of the Federal Open Market Committee.

“The market is really ripe for a correction. The regional benchmark is just being followed by the local market because they are also on the red side. An overseas correction signaled investors to take profits,” del Castillo said.

The Philippine Stock Exchange index (PSEi) ended Friday trade down 50.03 points or 0.73 percent at 6,842.15, snapping a five-day run up that saw the benchmark index move nearer the 6,900-point mark. The wider all shares fell 22.59 points or 0.55 percent to 4,103.79.

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