Market to remain cautious

Local stocks are expected to be traded with caution when the market reopens Tuesday after a long weekend break.

The stock market is closed on Monday as the nation goes to the polls.

Last week, the main-share Philippine

Stock Exchange index slipped by 68.02 points, or 1 percent, to close at 6,539.81 on Friday.

“Limited trading bands are seen as market players assess nine-month corporate earnings, including validation of capex (capital spending) rollout for the fourth quarter toward the first quarter of 2014. Nevertheless, this lull would be ripe to gradually build up on equities, especially toward 2014,” 2TradeAsia.com said in its weekly research note. “Some might be expectant of new listings slated for the coming weeks, apart from corporate note issuances.”

Immediate support for the index was seen by 2TradeAsia.com at 6,500, and resistance at 6,600 to 6,630.

The stock brokerage said equities paused for a breather last week, triggered in part by China’s move to raise its money market rates to avert inflationary pressure. It added that some investors locked in gains on intraday ascents, awaiting leads for third quarter results.

Last Thursday, the central bank kept its monetary settings unchanged, thereby keeping key interest rates at record-low levels.

“This week’s shortened trading sessions ahead of the Barangay Election & All Saints’ Day break appear to have been ill-timed with the latest spike in China’s money market rate. This may have prompted the latest selloff in equities, especially after the Bank of China refrained from injecting liquidity in its financial system based on the late-week halt in reverse repurchase activities,” 2TradeAsia.com said.

But this sell-off may be temporary since long-term yields for benchmark notes remain unchanged, it added.

The stock brokerage said fund managers would be looking at another status quo from the US Federal Reserve during its Oct. 29-30 policy meeting. It added that the spotlight might still be on China, “being the anchor economy while industrialized countries mend.”

“This combination might lead to mixed sentiment for interest-sensitive sector (such as property/financials), although we are inclined toward an expected kick in demand given ample liquidity in the system,” it said.  Doris C. Dumlao