Trading seen choppy this week

MANILA, Philippines - Trading could be choppy this week with investors expected to take a step back amid renewed concerns over the eurozone.

Investors have turned cautious after a weak Spanish auction raised the prospect that Spain may not be able to meet its 2012 budget deficit target. With the employment rate expected to hit a new high, Madrid’s debt is seen to sharply rise to 79.8 percent of GDP this year from only 68.5 percent in 2011.

Adding to the downbeat sentiment is the US Federal Reserve’s pronouncement it would not provide any new stimulus to the economy in the near term.

Accord Capital Equities Inc.’s Jun Calaycay said the index is expected to move sideways with a slight positive bias heading into the release of important economic and corporate numbers after Easter.

Calaycay said investors will continue to grope for firmer leads to justify a further advance in equity prices.

He noted that trading at the local market has slowed since the beginning of the current month. “This emphasizes the possible seasonality of the observed weakness. Even the market’s breadth has narrowed, indicating the slight dominance of the bears,” Calaycay said.

“Having said these, we remain steadfast in our bullish outlook for the full year. This implies that sudden or not-so-sudden shifts in sentiments open doors for bargain hunters and long-haul portfolios. Nonetheless, we note that local share prices are not immune to the gyrations in global equities and other external shocks. This keeps our optimism tempered, which implies taking calculated risks is an imperative,” Calaycay added.

Calaycay said holding firms offer the best trade-off between returns and volatility of returns. “It allows a better average return that both the PSEI and All Shares Index while exposing investments to lesser volatilities, or in investment parlance, risk,” he said.

Financials, on the other hand, have the highest return and remain a candidate for growth-oriented portfolios.