Volatile trading seen
Volatile trading is widely anticipated in the stock market this week with all eyes on the Oct. 17 deadline for the US—which is heading to its third week of a government shutdown—to raise its debt ceiling and avoid a debt default.
Last week, the main-share Philippine Stock Exchange gained 99.32 points or 1.55 percent to close on Friday at 6489.80 on hopes that there will be some breakthrough on the US budget debate. At the same time, the nomination of Janet Yellen as US Federal Reserve chair brought relief to global markets given her “dovish” stance on the issue of tapering of US monetary stimulus.
“The volatility and uncertainty in the market will persist until Oct. 17, the deadline for raising the debt ceiling,” said Banco de Oro Unibank chief strategist Jonathan Ravelas, adding that movements in the stock market this week would rely heavily on the decision of US lawmakers.
“Expect the market to range within the 6,000-6,500 levels. A sustained moved above 6,500 could try the 6700 levels,” he said.
AB Capital Securities analyst Abbygayle Estrella said the preferred strategy for this week would be to stay on the sidelines as a new countdown begins for the Oct. 17 US debt ceiling deadline. Markets were closely watching the negotiations between Democrats and Republicans, she said.
“We think that the direction of global markets will be largely anchored to the ongoing dialogues, including updates on the resolution for the government shutdown, thus fueling volatility,” she said.
In a separate note, she noted that US markets would be closed on Oct. 14 for the Columbus day celebration but Estrella said market guidance would be present as outgoing US Fed Chair Ben Bernanke would speak at the Bank of Mexico on the same day.
Among the important US economic figures coming out this week are the producer price index, retail sales, consumer price index and jobless claims.
Meanwhile, the local market will be closed on Tuesday (Oct. 15) in observance of the Eidul Adha or Feast of the Sacrifice, shortening the trading week to four days.
“Despite the bullish sentiment that prevailed in the markets last Friday due to the debt ceiling hopes, we still keep our windows open on two possibilities. The main index is currently placid along the 50-day simple moving average and last Friday’s gap broke the 50-day exponential moving average. The gap, on a technical view, seemed toppish and a continuation is either a make or break,” Estrella said.
Failure to decide on the debt ceiling could drown the PSEi back to 6,240 while a favorable result this Friday could send the local index to 6,700, she said. Doris C. Dumlao
