MANILA, Philippines - Local stocks will continue to show a lack of direction as investors seem reluctant to make any significant moves amid persistent fears over the precarious fiscal health of the Eurozone.
Astro Del Castillo, managing director at First Grade Holdings, said the market is likely to remain choppy on the back of weak global cues. “It’s going to dance to the same tune as last week, “ Del Castillo said over the weekend.
Despite new governments taking over in Italy and Greece to push through key reforms, the cost of borrowing for under-pressure countries remained dangerously high.
The PSE Index (PSEI) closed flat last week at 4,302.43 due as concerns about the global economy sapped enthusiasm.
Fitch ratings agency earlier warned that the contagion effects on US banks were “potentially large” if the crisis spreads beyond Greece, Ireland, Italy, Portugal, and Spain. It pointed to the risks in France, where banks are being weakened by their own eurozone exposure, while Paris is cutting spending to avoid losing its AAA credit rating.
According to Fitch, the top five US banks had $188 billion in exposure to France at the end of the second quarter, $114 billion of it to French banks.
Among the stocks that had a strong runup last week were URC (rising 7.45 percent), ICTSI (3.02 percent), and Lepanto Consolidated B (18.7 percent).
AB Capital Securities said investors are likely to await the release of US preliminary GDP. “Strong results from the prelim GDP may trigger renewed optimism for the global economy as the past quarters have been disappointing. A confidence vote for Mario Monti and elections on Spain will also influence global markets over the next week,” AB Capital Securities said.