Sideways movement of stocks to continue this week, say analysts

The sideways movement of stocks is expected to continue this week as the market remains in consolidation while investors await and seek trading leads.

Analysts said President Arroyo’s announcement that she would run in the May 2004 presidential election, a reversal from an earlier decision, would unlikely affect shares as it had been widely assumed by the public.

Philippine Stock Exchange chairperson Alicia Arroyo said the President’s confirmation of her intention to run next year would have a positive effect on the equities market. "The President’s intention to run in 2004 will greatly reduce the political uncertainty brought by the previous speculation over her plans. The business community will welcome this clear signal from the President since they can now factor this into their planning. More importantly, we expect more positive sentiment from investors who are looking for continuity of the reforms and greater predictability and stability in the policy environment," she said.

Analysts said the market will remain within the narrow trading range of 1,270 to 1,330 with most investors refraining from making any major moves ahead of the release of third quarter earnings results of listed companies.

In its weekly market outlook, RCBC Securities said the market may encounter further resistance as it enters the last quarter of the year, given its propensity to slide during the month of October.

RCBC Securities said October is considered as one of the most "negative" months for the market. In the last four years, the Phisix dropped by an average of eight percent month-on-month during October.

RCBC Securities, however, said expectations of higher corporate earnings, fuelled by the continued recovery of the economy both locally and internationally, could fuel another upmove in the market and could possibly break the trend for this month.

On a sectoral level, investors anticipate that earnings of telecom firms would continue improving behind the strong growth in subscriber base while the forecasted shortfall in electricity supply amidst rising demand could also attract investors towards electric companies.

Election-related spending expected in the fourth quarter could also fuel demand for consumer-related stocks, RCBC Securities said.

BPI Securities, for its part, said bargain hunting on select issues is likely to continue given that investors may take advantage of lower prices to accumulate and to take positions ahead of the release of third quarter data.

Last week, the Philippine Composite Index fell 9.12 points or 0.09 percent to 1,304.73, partly due to Moody’s Investor Service’s downward revision of its credit ratings outlook on the Philippines to negative from stable. The negative news increased selling pressure, particularly from foreign investors.

Bargain hunters quickly stepped in to take advantage of this market dip. Accumulation was helped along by the continued foreign interest in Philippine Long Distance Telephone Co. as evidenced by the strong gains registered by Tel ADR. This positive mood, however, was limited by the continued unease over the possible breach of the budget deficit ceiling in September.

Moody’s also revised its outlook to negative on six Philippine Banks: Bank of the Philippine Islands, Metrobank, Equitable-PCI Bank, Philippine National Bank, Land Bank of the Philippines and the Development Bank of the Philippines.

Moody’s cited heightened political uncertainties for the outlook downgrade. It believes that politics can have detrimental consequences for the economic and financial situation in the country.

Online securities portal Philstocks.net, on the other hand, said the market’s momentum suggests that the direction is still up. "Some investors are concerned about missing out on the next bull market and are more inclined to buy rather than sell. However, stocks may have a tough time moving higher given investors’ nervousness about fundamentals. Some market players are worried that while stocks are moving up, economic data is not sufficiently upbeat to keep the market on its upward path," Philstocks.net said.