As world markets anxiously await the results of the May 16 meeting of the US Federal Open Market Committee, equities investors are likely to stay in the sidelines with barely any perks to spice up trading.
This particularly holds true for the local bourse, which is seen to tread back into negative territory this week despite a late rally last Friday.
The 30-issue Philippine Stock Exchange index (Phisix) on Friday snapped a consistent downtrend that put it precariously close to breaking the 1500 support level. The Phisix edged up 34.10 points to 1539.31 on bargain hunting of selected blue chips, although this was still lower than the 1551.90 level a week earlier.
"It's more of the GFIs (government financing institutions) buying into favored stocks," an analyst from a local stockbrokerage firm said, referring to Friday's uptick.
He said with investor sentiment driven down by the combined effects of the Mindanao conflict, the weakening peso and edgy overseas markets anticipating a steep hike in US interest rates based on the FOMC meet, the GFIs led by the state pension funds decided to move in and pick up oversold index stocks such as PLDT, Meralco, San Miguel, Ayala Land and Philippine National Bank, in the process inducing a market run-up.
"If there will be no follow-through buying, the market will again test the 1400 to 1450 level. Once the FOMC announces its decision on Tuesday (Wednesday, Manila time) and the GFIs unload their stocks to take profits, its going to be downhill from there," he said.
Market watchers have been anticipating a 50-basis point (half a percentage point) jack-up in US key rates in efforts to curb inflationary pressures caused by an overheating US economy.
The renewed speculation on the peso is also taking its toll on the market. The local currency touched a 19-month low of P41.50 to a dollar last Friday as pressure keeps building up due to the Mindanao situation and the interest rate jitters.
"The market is very fickle at this point. The Mindanao crisis has eroded the confidence of foreign funders in the Philippines because they see the situation as another East Timor. It does not help that international crude oil prices had gone up to $24 per barrel again, which fuels the possibility of another oil price increase to completely wipe out the price rollback made earlier," the stock analyst said.