Index expected to slip further

MANILA, Philippines - Share prices went back to the doldrums last week as investors keenly await the outcome of the US Federal Reserve’s meeting this week.

The benchmark Philippine Stock Exchange index (PSEi) is seen further slipping to the 6,500 levels, said Jonathan Ravelas, BDO chief market strategist.

He said lingering jitters on the scheduled meeting of the US Fed continues to affect investor confidence.

He said last week’s breach of the 6,800 levels continues to indicate the stock market’s bearish mode.

“The prospects of an interest rate hike by the US Fed weighed on the market, with dampened investor sentiment triggering a sell-off,” Ravelas said.

Jason Escartin of 2Trade Asia.com shared the same view.

“Local equities succumbed to a sell-off on concerns over the US Fed interest rate hike in the coming week,” he said.

Thus, the PSEi slumped 187 points, breaching support below 6,800 at 6,735 (-2.70 percent week-on-week), led by services (-6.38 percent) and property (-2.94 percent). 

Value turnover likewise fell 24 percent to P5.03 billion.

Net foreign selling prevailed P491 million.

For the week, the US Fed is widely expected to adopt a 25-basis point rate hike during their policy meeting on Dec. 15.

However, Escartin said what is crucial are the succeeding increases.

“What will be underscored overall, is the pace of successive increases that will be taken, especially for the first half of 2016. Expectations on the trajectory of rate hikes would reflect in regional central bankers’ move, to pacify spikes in capital outflow, in case of non-action on policies,” he said.

Given the usual lagged effect of global measures, local monetary authorities would likely remain on status quo due largely to tame inflation. While heightened monitoring is expected for US inflation and labor data, increased volatility is in store for currencies and fixed income markets, pending also the decision of Britain to exit from the European Union (EU), Escartin said.

Because of the overall expected bearish mode of the market, investors are advised to be cautious.

“We now need the index to stage support rebound to at least 6,000 to prevent a possible downward reversal,” said Luis Limlingan, managing director of Regina Capital.  

He said investors should accumulate issues that trade above long-term averages as these have better chances of withstanding market volatility.