Financial markets are on a long holiday break until tomorrow as the nation observes “All Saints’ Day.”
Last week, the main-share Philippine Stock Exchange index (PSEi) lost 245.42 points or 3.2 percent to close on Friday at 7,404.80.
The market has been on a downturn for the last seven days as US interest rate and commodity price jitters weighed down regional markets.
Compared with the previous week when President Duterte’s trip to China saw window-dressing and increased investor confidence that both led to a short-term rally, local stockbrokerage AB Capital Securities said the Chief Executive’s trip to Japan last week failed to reverse the gloomy sentiment in the market.
“Market uncertainty continues to weigh on the market, with several key events happening before the end of the year,” AB Capital said.
The local stockbrokerage said the key events to watch out for would be the US elections on Nov. 8, the formal Organization of Petroleum Exporting Countries (Opec) meeting on Nov. 10 and the Federal Open Market Committee (FOMC) meeting on Dec. 14.
“The likelihood of a rate hike in the December FOMC meeting has been steadily increasing this month, settling currently at 70 percent,” AB Capital said.
At the same time, AB Capital said oil prices have also been volatile, noting the lack of any actionable news from Opec the past few weeks after their soft agreement last September to curb production levels in their November meeting.
“That said, confidence was regained after it was reported that Opec reaffirmed its commitments to Russia that the cartel was willing to cut output by 4 percent,” the brokerage said.
“Ultimately, however, the full release of corporate-earnings results by November should guide the market. Initial results have been relatively favorable as most companies show double-digit growth in the otherwise historically tepid third quarter. The market shall see if these earnings are indeed enough to justify its currently expensive 20.7x P/E (price to earnings) level,” the brokerage said. A P/E ratio of 20.7x means that investors are paying 20.7 times the amount of money they expect to make from the market.
On Friday, it was reported that the US economy had expanded by 2.9 percent year-on-year in the third quarter, marking its best performance in two years. Growth had picked up from the 1-percent average expansion in the first two quarters.