After last week’s upswing, the local stock market may return to a consolidation mode this week or even pull back slightly on the dearth of incentives to load up on equities in a big way.
Last week, the main-share Philippine Stock Exchange index gained 51.84 points, or 1 percent, to close at 5,196.19.
In an interview, Pentacapital Investments chief strategist Eric
Claudio said that given mixed market signals, trading volume would likely thin out this week while the index would likely move sideways or even slightly decline. Any dip, he said, would be because of the decline in market volume and not so much on corporate or economic developments.
“The seasonal/cyclical lack of news can discourage buying and therefore volumes can go down, pulling down prices a little bit,” he said, noting this was the usual lull after the quarterly reporting season and a period when many western investors go on long summer holidays.
US Federal Reserve chief Ben Bernanke’s speech before central bankers on Friday, Claudio said, was an admission that the American economy was not doing well but noted that the knee-jerk reaction was positive because this suggested further monetary easing.
“But the positive effect becomes shorter and shorter as time goes by with the frequency the government helps the economy to grow,” he said.
On the economy, he said last week’s 5.9-percent gross domestic product (GDP) growth rate for the second quarter was not disappointing. “It’s just that some are taking profits because some of the companies are showing signs of slowing down but local economic fundamentals are still strong,” he said.
AB Capital Securities said it was expecting thin trading in the coming week, which is still covered by the “ghost month.”
Freya May Natividad, an analyst at 2tradeAsia.com, said “modest activity might greet equities given the weekend pause in Wall Street with the celebration of Labor Day on September 3. Commodity-related shares might make their comeback, as institutional investors reposition in favor of assets that provide inflation hedge.”
She said the strategy would be to spot oversold issues. Immediate support for PSEi was seen at 5,100-5,150 and resistance 5,250-5,300.
Overall, he said the signals in the local market were mixed, with participants, especially foreign players, becoming impatient for profit-taking yet the indicators turn positive whenever the market was sold down. “Oftentimes, when you have divergence signals, you take a wait-and-see attitude,” he said.—Doris C. Dumlao