The local stock barometer is seen to consolidate this week as investors lack fresh incentives to load up stocks in a big way.
Last week, the main-share Philippine Stock Exchange index (PSEi) slipped by 0.8 percent to close on Friday at 7,776.77, dragged down by US-Iran tensions and lingering jitters on Metro Manila’s water concessionaires.
Even as political tensions in the Middle East have eased, investors “remained sidelined awaiting for fresh leads to entice them back to the markets,” BDO Unibank chief strategist Jonathan Ravelas said.
Ravelas said last week’s finish at 7,776.77 highlighted potential consolidation within the 7,700 to 7,900 levels.
“But risk lies at the break below 7,700, which paves the way for a test of the 7,514.05 levels, which could occur in the near-term,” Ravelas said.
In a research note dated Jan. 10, Franklin Templeton Emerging Markets Equity’s Manraj Sekhon, Bassel Khatoun and Salah Shamma believed there was a low probability of seeing further escalation in tensions that could lead to an all-out direct confrontation between US and Iran. Nonetheless, they expect this issue to hound the region for some time.
“Iran is likely to continue with its low-intensity warfare, especially as its economy remains under pressure from choking economic sanctions, most likely using proxy assets to target the United States or its interests in Iraq, Lebanon or the Strait of Hormuz,” the research note said.
“It is worth noting that other global powers—notably France, Britain and Germany, key signatories of the 2015 Joint Comprehensive Plan of Action nuclear deal—have expressed positions that are supportive of near-term de-escalation of current tensions. This opens the door to a possible diplomatic breakthrough that could alter the current impasse,” it added.
Franklin Templeton noted that both China and Russia also appeared likely to strongly dissuade Iran from taking more significant action.
“Both countries’ growing influence in the region, and also Iran’s increasing political and economic reliance on them, means that this is likely to provide a key deterrent for Iran,” the research said.
Franklin Templeton expects the market to digest the recent developments and the overall risk profile to normalize in the coming months. INQ