Investors seen to wait for fresh leads before loading up

Stock market investors are seen staying on the sidelines this four-day trading week, the second week of the “ghost month” in the Lunar calendar, in the absence of fresh catalysts to load up on local equities.

Today, the stock market is closed in commemoration of the National Heroes’ Day.

Last week, the Philippine Stock Exchange closed at 8,015.14, flat from the previous week’s finish of 8,016.73.

“The short trading week as well as the lack of leads will encourage investors to stay mostly on the sidelines,” said Manuel Lisbona, president of PNB Securities.

“The market should continue treading water at the 8,000 level; otherwise, we may find the index back to 7,850,” Lisbona said.

BDO Unibank chief strategist Jonathan Ravelas said market players had been taking a defensive stance as they await fresh leads that could sustain the market’s rally above the 8,000 levels,

“Market players see the passage of the tax reform bill as a key driver to sustain the government’s infrastructure program,” Ravelas said.

With the comprehensive tax reform program (CTRP), the government hopes to bring more money to the pocket of consumers while funding its “build, build, build” infrastructure agenda.

The first CTRP package simplifies and lowers personal income tax rates while broadening value added tax coverage, rationalizing estate and donor’s tax and adjusting oil and automobile excise taxes. Additional revenues from this package area also targeted to fund the government’s build, build, build infrastructure program. The House version meets the minimum reforms sought by the Department of Finance (DOF). All eyes are now on how the Senate version would shape up.

“Chartwise, the week’s close above the 8,000 levels continues to highlight that the market still has momentum to try the 8,100 to 8,150 levels,” Ravelas said.

Ravelas said immediate support and resistance levels were at 7,850 and 8,100 levels, respectively.

On Friday, US stocks rose for lack of any hawkish surprise in US Federal Reserve chair Janet Yellen’s speech at Jacksone Hole. Traders were also relieved that European Central Bank chief Mario Draghi didn’t talk down the value of the currency in the same symposium.