LOCAL stocks are heading toward another tumultuous week of trading ahead of the next US Federal Reserve policy meeting, during which a liftoff in interest rates is widely anticipated by global markets.
Last week, the Philippine Stock Exchange index (PSEi) reversed earlier gains to close the week 0.07-percent lower at 6,921.93.
“Chartwise, the PSEi’s inability to stay above the 7,000 levels continues to highlight the market’s bearish mode,” said Banco de Oro Unibank chief strategist Jonathan Ravelas. “Continue to see a retest of the 6,500 levels in the near term.”
Luis Gerardo Limlingan, managing director at Regina Capital, said investors should take caution this week as the index continued to struggle below 50-day moving average resistance.
“Until breached, we expect a choppy weekly trade with trend bias on the downside due to weakening technicals,” he said, noting that 6,900 was still the key level to watch this week.
If the index would be able to stay above 6,900, Limlingan said the market would still see some upside. “Otherwise, we would see extended corrections to 6,720 with a maximum downside of 6,600.”
For buying strategy, Regina Capital recommended keeping light positions and waiting for a “clear support bounce” before accumulating.
On Dec. 15 to 16, the US Federal Reserve Open Market Committee is set to conduct its policy meeting. Global markets are expecting the Fed to raise interest rates for the first time in a decade during its closely watched meeting.
“Markets will remain volatile given mixed data from the US, China, Europe and Japan. While the Fed is data-dependent, it is also market-dependent and is conscious of market ramifications,” said Michaelangelo Oyson, chief executive of BPI Securities.
Oyson said there would likely be an initial liquidity crunch when the Fed raises rates despite the liftoff risk having been much-talked about since the second quarter and despite having already resulted in a massive outflow from emerging markets. Doris Dumlao-Abadilla