Market volatility to continue

MANILA, Philippines - The local equities market is expected to experience continued volatility this week amid a slew of negative developments on the external front, said Astro del Castillo, managing director of First Grade Finance Inc.

Jason Escartin of 2TradeAsia.com said investors would also be looking at the release of the country’s fourth quarter gross domestic product performance on Thursday.

“It’s a wait and see for now,” he said.

Escartin said with the country still considered as one of the fastest-growing economies in the region, better-than-expected results could douse off part of the pessimism, but there are no clear signals in place yet to cap the “global volatility overhang.”

Escartin sees the index at 6,100 points, with secondary support at 6,000 and resistance at 6,300.

As for external developments, Escartin said investors would also be looking at the US Federal Reserve’s next move.

“Investors will be anticipating the Fed’s stance on the recent spate of selloffs in global financial markets, especially to the extent the current macro picture impacts two critical factors: labor and inflation outlook. The key point of interest will be on the timing of the next rate hike.  Any consideration to delay might be lauded and could encourage slight bargain hunting,” Escartin said.

Another factor is the oil prices, which have been spiraling down the past weeks.

After the International Energy Agency (IEA) raised the alert, the world could “drown in oversupply” as Iran re-enters the market, some rebalancing is expected to take place, with more production cuts expected stateside, analysts said.

China’s growth slowdown, meanwhile, remains a major point considered by investors before they decide to park their funds in the local stock market, analysts also said.

Luis Limlingan, managing director of Regina Capital, said recovery could only extend to 6,300.

“Provided the 6,000 holds, we expect rallies from the index this week as oversold readings from two weeks ago has already started to lighten. However, these rallies are temporary due to highly bearish technicals – no significant reversal signals were spotted so recovery trend could only extend to 6,300 with a max of 6,585,” Escartin said.

If this does not happen, he said the index could fall to 5,900 to 5,400.

“As such, we reiterate our defensive strategy from last week by selling on rallies until technical readings show reversing signals,” Escartin added.