Trading seen to slow down this week

By Zinnia B. Dela Peña

The Philippine Star 05/20/2006

 

Trading is seen to slow down this week on investors’ concerns over rising inflation prospects in the US, analysts said.

 

"Coming from extremely volatile weeks of ups and downs, the market should see trading activities slow down this week. Weakness in the major markets abroad will continue to dampen the mood of investors, who are still waiting for stocks to correct to more reasonable and attractive levels," AB Capital Securities said in its weekly market report.

 

Last week, the Philippine Stock Exchange index (PSEi) shed 162 points or six percent in value as the US market’s 214-point drop last Wednesday brought world markets on its knees. It, however, managed to hold above the 2,350- support mark, a 10-percent correction from the recent high of 2,602.

 

Investors were rattled by the Dow’s two percent decline, which resulted in a domino effect on other global markets. It was the Dow’s biggest one-day percentage decline since January, caused mainly by higher than expected inflation for April.

 

"Given prospects of further tightening, it is feared that a slowdown in the world’s biggest economy will affect Asia which exports much of its merchandise towards the US," AB Capital Securities said.

 

"Fundamentally, the market is also going to be wary about the prospects of higher interest rates. The recent inflation data in the US point towards another rate hike for the US FOMC in June. This is already putting pressure on the peso and the equities market. Another Fed increase may force the hands of the Bangko Sentral ng Pilipinas to raise overnight rates here," AB Capital Securities added.

 

This development doused cold water on last week’s news that the Philippine export market was on the verge of a recovery after it posted a 26-percent rise in March exports to $4.1 billion. According to the NSO, the US remains as the Philippines’ biggest export client, accounting for 17.1 percent of last month’s total exports. This figure was actually higher than last year where the US accounted for 16.2 of Philippine exports.

 

Immediate support is seen at 2,340 while resistance is pegged at 2,380 to 2,400.

 

Online investment stock portal 2tradeasia.com said seculative stocks might take less of the spotlight this week, given the recent correction at the volatile crude and metals markets.

 

"Government’s affirmation of support for the mining sector however, should prod long-term players to position in selected fundamentally sound stocks, especially those that would benefit from direct dollar investments that would support accumulation of much-needed international reserves and employment opportunities that help drive economic growth," 2tradeasia.com said.

 

2tradeasia.com said funds flow movement could revert in favor of property and financials, as these benefit from stable interest rates and prospects for improved lending this year.

 

http://www.philstar.com/philstar/NEWS200605220707.htm