US polls, corporate earnings to dictate market direction
Local stocks are seen to continue trading with caution this week as America elects a new president and as more local corporate earnings reports come out.
Last week, the main-share Philippine Stock Exchange index (PSEi) lost 177.43 points or 2.4 percent to close on Friday at 7,227.37. The main index has fallen for the second straight week.
“The US election is keeping local investors sidelined as they await the outcome. I am looking at a 7,000 to 7,500 range this week,” said Jonathan Ravelas, chief strategist at BDO Unibank.
Apart from jitters ahead of the Nov. 8 US elections, investors are anxious over a potential US Federal Reserve (Fed) interest rate increase by December.
“As the US elections draw near, and both candidates being statistically tied in several polls, political uncertainty weighs on investor sentiment. Moreover, the conclusion of the November Fed meeting only increased the likelihood of a rate hike in December, currently nearing 80 percent,” local stockbrokerage AB Capital Securities said.
AB Capital said technical indicators point to an oversold market, suggesting that bargain-hunting and buying relief could be expected in the near term.
“Meanwhile, our current P/E (price to earnings ratio) level of 20.11x indicates that our market is moving toward healthier valuations,” the brokerage said. A P/E ratio of 20.11x means that investors are willing to pay 20.11 times the kind of money they expect to make from the market.
AB Capital said it remained to be seen, however, if buying relief could be seen this week amid market volatility with the US elections.
The PSEi’s primary and secondary resistance levels are seen at 7,400 and 7,700, respectively.
“Moreover, the PSEi needs to breach the 7,400 level to make a case for a strong bullish reversal,” it said.
AB Capital sees immediate support levels at the 7,200-7,100 range, while secondary support level was seen at the 6,900 level.
This week, AB Capital expects the PSEi swinging at the suggested immediate support levels due to a lack of fundamental market direction.
