Stock market seen to remain in doldrums this week

After President Arroyo’s State of the Nation Address (SONA) failed to excite the stock market, analysts are seeing more dull trading this week as the traditionally lean trading month of August sets in.

"The market is expected to remain the same especially in the month of August, where market orders are usually thin. There is little conviction or catalyst to change the August tradition," Jose Vistan Jr. of AB Capital Securities said.

At the close of last week’s trading, the 30-company Phisix again finished lower by 13.02 points or 0.95 percent week-on-week to 1,363.34. The index, which touched a fresh nine-month low last week, has not had a winning week since the middle of last month.

"Poor visibility on the macro-economic and corporate fronts will continue to keep pressuring market interest," Vistan wrote at the investment website PhilStocks.net. "Most have hoped that the situation would get better by the second half of the year. Now, hopes for improvement by yearend have waned as companies have slashed revenue and earnings outlook."

Spencer Yap of BPI Securities said the market’s optimism on the SONA delivered last Monday did not materialize in the hoped-for recovery as investors digested the many promises outlined in the speech.

He said investors were generally heartened by the commitment of the current administration to economic reforms and political stability, but ultimately the market wanted more concrete results.

Vistan said President Arroyo’s first SONA provided very few suprises but was generally encouraging, except that it later came under fire for its lofty objectives and consequent funding requirements.

Over the near term, the market will continue to track the movement of the peso and will factor in the release of other corporate first half financial results expected within the month, BPI’s Yap said.

"Positive first half results from key index issues may spur some buying but the broader market does not seem to have yet found stronger support. Certainly, share prices are at very attractive levels, but the overhang of possible further foreign selling may dampen buying support at this time," Yap added.

Vistan said unless some improvements in leading macro-economic indicators (GNP/GDP, BOT, inflation, etc.) are seen, "there is still no urgency to get back into the market to catch a bull rally predicated on a turning economy or an earnings pick up."

Last week, the market was perked up a bit by news of the impending acquisition by San Miguel Corp. of RFM’s majority stake in Cosmos Bottling Corp., (CBC) as interest in the three issues seesawed throughout the week.

Yap said investors have been taking profits on RFM and CBC. on each confirmation of the transaction while on the other hand, SMC (particularly the "B") shares have remained strong as investors contemplated the postive impact of CBC on SMC.

"We expect RFM and CBC to recover as details of the sale are announced; RFM will rise on the possibility of a special cash dividend while CBC minority shareholders will benefit from a likely tender offer from SMC," he said.