Unstable trading ahead as market tries to reclaim 7,300

The stock barometer is facing wobbly trading this week as investors brace for the upcoming MSCI index rebalancing while on the lookout for fresh clues from the ongoing third quarter corporate earnings reporting season.

Outside the main index, all eyes are on tomorrow’s stock trading debut of Villar-led grocery chain AllDay Mart, whose P4.5-billion initial public offering (IPO) was overwhelmingly received by retail investors. This IPO hit the 10-percent mandatory allotment for local small investors for the first time in history, with demand hitting almost twice the quota.

Last week, the main-share Philippine Stock Exchange index (PSEi) pulled back by 234.91 points or 3.22 percent, closing on Friday at 7,054.70.

“The PSEi may continue to soften in the short run as foreign institutions are seen to continue to taper MSCI Philippines heavyweights like SM Prime, Ayala Land, SM Investments, Ayala Corp., BDO Unibank, JG Summit etc. ahead of the MSCI rebalancing announcement on Nov. 11,” said Ron Acoba, chief investment strategist and cofounder of equities research provider Trading Edge Consultancy.

Acoba is expecting AC Energy and Monde Nissin to be added to MSCI.

“Given that there will likely be no deletions, the weights of the other components may likely be reduced,” Acoba said.

“In any case, the index’s mid-run bias remains on the upside and we expect it to eventually surpass its 7,300 high en route to its major resistance at 7,600,” he said.

Apart from the MSCI effect, a string of public offerings is also seen to suck out some market liquidity.

“The action will be in AllDay,” said Joseph Roxas, president of Eagle Equities Inc. However, he said upcoming offerings would also have an impact on market liquidity.

Electricity grid holding firm Synergy will wrap up its P13.85-billion follow-on offering today, while liquor distributor The Keepers’ P4.5-billion offering will start on Nov. 4 until Nov. 10.BDO chief strategist Jonathan Ravelas said investors had locked in gains last week ahead of the long weekend break and more corporate earnings reports coming out.

The government is also set to release the country’s third quarter gross domestic product report on Nov. 9.

Ravelas also noted last week’s announcement of the extension of Alert Level 3 for Metro Manila until Nov. 14 had added to the market’s woes.

“The week’s close at 7,054.70 [highlighted] that a near-term top is in place at the month’s high at 7,326.10,” Ravelas said.

“Expect consolidation within the 6,950 to 7,300 levels in the near-term. But if 6,950 gives way, this could lead to further losses towards the 6,300 to 6,500 levels,” he said. INQ