Market swings may continue this week

THE LOCAL market may see more volatility this week amid some technical rallies as European debt worries may continue to dampen investor sentiment.

The Philippine Stock Exchange index (PSEi) rose by 2.93% or 113.69 points to 3,999.65 last Friday versus 3,885.96 the week before, when it first slipped below the 4,000 psychological barrier -- from which it has not recovered since.

The broader all-share index, on the other hand, rose by 2.76% or 76.93 points to 2,859.23 from 2,782.30.

“External events caused massive swings and higher volatility in the PSEi and foreign markets the whole [of last] week. Finding no lasting solution yet to the debt woes in Europe, major markets reeled and alternated between gains and losses,” said analyst Maria Arlysa E. Narciso of brokerage firm AB Capital Securities, Inc. in a market report last Friday.

The same might be the case for this week.

“I think the market will consolidate this week given problems abroad,” said analyst Elizabeth S. Abadillo of brokerage firm Angping & Associates Securities, Inc. in a text message yesterday.

Abroad, auditors from the European Union (EU) and the International Monetary Fund (IMF) visited debt-laden Greece last week to discuss its finances after noting it had slipped against its commitments. The Greek government, meanwhile, was expected to initiate fresh spending cuts and tax hikes in order to secure the latest bailout installment from the so-called “troika” of the EU, IMF and European Central Bank (ECB).

Despite the worst third quarter closes for Wall Street since the 2008 global financial crisis, blue-chip Dow Jones industrial average rose by 1.57% or 168.90 points to 10,913.38 from 10,744.48 a week ago.

The broader Standard & Poor’s 500 index, however, fell by 0.44% or 5.01 points to 1,131.42 from 1,136.43, while tech-heavy Nasdaq composite index dropped by 2.73% or 67.83 points to 2,415.40 week on week.

Describing trading at the PSE last Friday, Bonner C. Dytoc of brokerage firm Angping Associates & Securities, Inc. in a market report yesterday said: “The last trading day was a welcome relief to a suffering market as it was able to rise by 122 points to return to just under the 4,000 level. But at this point, any rally that the market makes is a cue for those who still have winning positions to take their profits while they still can.”

The safest tack for investors this week will be to be on the liquid side and sell or invest in defensive issues or high dividend-yielding stocks such as Philippine Long Distance Telephone Co. and Aboitiz Power Corp., Ms. Narciso said.

Concrete and positive news after the troika’s assessment of Greece may yield better direction for the market this week, she added.

“For now, volatility is still high. The PSEi would likely swing erratically between gains and losses until it finds a solid ground where it can consolidate,” Ms. Narciso added.

This, as the local bourse extends stock trading to 1 p.m. beginning today in order to boost trading volume in preparation for the link-up with regional bourses next year.

The hour-long extension will give investors more room to adjust to foreign developments and capture other markets, benefitting them in the long run, said analyst Astro C. del Castillo, managing director of brokerage firm First Grade Holdings, Inc., in a telephone interview yesterday.

Initial support and resistance levels for the week are pegged at 3,820 and 4,120, respectively, Ms. Abadillo said.

 

 

Posted by: Entrepreneurs Accounting Academy (EAA)

 

 

Article of: Franz Jonathan G. de la Fuente

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