Market to take its cue from overseas developments

The stock market is expected to take its cue on developments overseas as investors await the speech of US Federal Reserve chairman Ben Bernanke for any hints of further interest rate hikes although some analysts believe that share prices will end in the positive territory this week given government’s improving fiscal position.

For the shortened trading week to Aug. 25, the composite index fell 2.38 percent or 55.37 points to 2,329.90 due to a late selling spree Friday and the absence of market-moving news in both the domestic and international markets. Telecommunications giant Philippine Long Distance Telephone Co. led the index’s decline as it tumbled five percent week-on-week from P1,980 to P1,890.

Unicapital Securities Inc.’s Ron Rodrigo said: "Technical analysis still points to a mix trading with a continued downward bias, but might have a positive closing due to bullish outlook from foreign investors."

AB Capital Securities said the index is now at its 50-day exponential moving average line, which is acting as its immediate support.

"At the rate shares were being sold down last Friday, it seems unlikely to hold. It doesn’t help that seasonal factors are also affecting investors’ appetite for stocks. The month of August tend to be famous for low trading volume and indecisive action. Add to this the strong sell off in the biggest free float market cap weighted index stock" AB Capital Securities said.

"We believe that main index’s break down from some key support levels will create some short term uncertainties in the market. However, this should be nothing more than a technical correction as economic and corporate fundamentals continue to improve," AB Capital Securities added.

Rodrigo pegged market support at 2,216-2,260 while resistance at 2,300-2,346.

Rodrigo said he expects interest rates to go down with the FitchRatings upgrading the country ceiling for the Philippines from BB to BB+ and the liquidity that the swap arrangements scheduled for next week will bring.

AB Capital Securities said short term traders may avoid index-linked issues and go for the speculative third liners, noting that September tends to be the best month for gold and gold stocks.

"For the past five years, gold typically would rise modestly in the first half of August and decline in the second half of the month. This in turn will be followed by a strong rally that starts during the first week of September and would last throughout the entire month. If Gold will behave as it typically does, we could see a rise in goldand gold stocks this week," AB Capital Securities said.