Cautious trading seen this week
MANILA, Philippines—Local stocks are seen trading with caution this week as all eyes are on the United States ahead of the August 2 deadline for its Congress to pass a legislation lifting the country’s debt limit, a measure needed to avoid a sovereign default.
Despite the sluggishness last week, the main-share Philippine Stock Exchange index was resilient to overseas jitters so far and managed to climb back to the 4,500 level to end at 4,503.63 last Friday.
“The momentum of last week’s general decline, in the absence of a clear direction in the crisis over the weekend, may carry over to the first two days,” said Accord Capital Equities Corp. dealer Justino Calaycay Jr.
Tuesday will be the make-or-break point, Calaycay noted, as the deadline lapses.
“We can thus expect investors to hold in abeyance major trading and portfolio decisions. Theoretically, we would be more confident in positing a possible sell-off to greet Monday’s trades,” Calaycay said.
But the trader said he could not discount another surprise.
“In fact, the prevailing consensus through much of last week was that the US would eventually pass the needed legislation to avert a default, although there was an equally wide agreement that a downgrade was inevitable,” Calaycay said.
While investors’ conviction is dependent on US developments, AB Capital Securities analyst Maria Arlysa Narciso said the first-half earnings reporting season could also lead index issues to finally make a firm move this week.
“Although there are external pressures, earnings results may provide some cushion to keep the market from a trek downward. For sure, an agreement will be reached and this could be a source of relief for investors,” Ms. Narciso said.
“What must be focused on now is the quality of earnings that are scheduled to be released next week. In the absence of election spending, which pushed profits higher last year, we can expect a moderate growth in results for the same period this year,” she said.
The index is seen having a support at 4,450.—Doris C. Dumlao
