No immediate recovery seen for slumping mart

The current slump in the stockmarket is likely to continue this week as the market grapples with a lethargic trading volume which analysts blame on the lack of investor interest and the effects of what was described as a restrictive law on how brokers are to conduct business.

"It’s going to be more of the same this week," veteran stockbroker Irving Ackerman said. "On a global scale, we are affected by the contagion of an economic slowdown in the US and Japan but at the domestic front, we are being hurt by the low liquidity caused by the restriction on brokering and dealing."

He pointed out that the volume of turnover has gone down to an alarming level of around P300 million - a paltry $6 million which is equivalent to a single trade in an average issue in Thailand or Malaysia.

Under the new Securities Regulation Code, brokers are not allowed to engage in dealing except in a few very limited instances. It has been estimated that dealing used to make up about 40 percent of the brokerage’s business.

"In the last 10 years, a volume of P300 million would have been a shock," Ackerman said. "Now, it’s getting to be the norm, rather than the exception."

With the broker no longer trading, the volume has gone down substantially and this has caused other players including the heavy-funded foreign brokers to take a more cautious stance.

The market’s direction will also be guided by the decision of the US Federal Reserve on interest rates, as the rate-setting body is expected to cut interest rates for the third time this year to stimulate a receding US economy.

This, according to the web-based investment research site PhilStocks.net, could fuel a technical rebound in combination with the market’s oversold condition. "The market has fallen enough that there is going to be some bargain hunting and bottom fishing. However, the staying power of a technical rebound is still questionable following last week’s across the board selling."

Local shares took a beating last week as investors dumped their holdings in reaction to the steep declines of major bourses such as the Dow Jones, Nasdaq and Nikkei markets.

Week-on-week, the Phisix slumped 5.67 percent or 90.07 points to 1,498.32, the lowest since the Arroyo administration took over on Jan. 22.