Bearish trading seen

Local stocks are seen trading with a continued bearish bias this week as global funds shun emerging markets in anticipation of the withdrawal of liquidity from the US Federal Reserve.

Before the long weekend, the main-share Philippine Stock Exchange index slumped 5.6 percent to close on Friday at 6,161.21, tracking the capital reversal out of Asian emerging markets.

AB Capital Securities analyst Abbygayle Estrella said that despite the white smoke on the US Federal Reserve’s withdrawal of its $85-billion monthly bond-buying program, the next question that could spark another session of immediate selling would be the actual beginning of the tapering. Many are betting that tapering would begin as early as next month.

A key indicator that markets would await this week, Estrella said, would be the preliminary second-quarter US gross domestic product (GDP) growth that had an advanced reading of 1.7 percent versus the revised real first-quarter GDP growth of only 1.1 percent. The jobless claims for this week are also seen as a crucial element in time for the updated reading of the US employment situation in the first week of September.

“If it would maintain the current trend, then the job numbers would finally be in favor of the Fed’s targets,” Estrella said.

The local market’s drastic decline last week actualized the covering of the gap that AB Capital Securities had proposed in its previous market outlook, which had an initial target of 6,100. “The renewed Fed uncertainty would linger for the coming week and would trigger a more cautioned movement from investors following last week’s bloodbath,” Estrella said.

The analyst said the local market’s relative strength index was also at its weakest point, making it susceptible to a continued decline,” she said. “Although the main index gained last Friday due to a last-minute push, we do not think it would be sustained this week,” she added. Any upward correction, she said, would have a limited target of 6,330, adding that the prevailing negative bias could pin the PSEi at the immediate support of 6,075.

“Although prices are already attractive, we advise investors to be unhurried in making positions since the market could still trudge lower depending on the next Fed developments,” she said.

Financial markets were closed Monday in commemoration of National Heroes Day. Doris C. Dumlao