Markets seek more stable footing

MANILA, Philippines - The local stock market will be on the lookout for a more stable footing following volatile and gloomy trading last week.

Analysts said investors would face a tug-of-war between fear – after last week’s massive decline – and opportunities for picking up bargains.

“As we move farther away from the fallout, the market can once more begin to take a more objective view of the horizon,” said Justino Calaycay Jr., analyst at Accord Capital Securities.

“The foundation for this proposition revolves around the recognition of an unchanged outlook for the domestic economy, and by extension, individual listed firms,” Calaycay said.

For Jonathan Ravelas, chief market strategist at BDO Unibank Inc., the Philippine Stock Exchange index (PSEi) will range between 6,000-6,400 levels.

“If 6,500 is broken, it may try 6,800. Failure to break 6,400-6,500 levels may signal a test of 6,000,” Ravelas said.

“On balance, the market should begin to find a more stable footing on which to propel the next rally,” Calaycay said.

But wild price swings are still possible as markets discount day-to-day news and developments mainly from the US and Europe, Calaycay said.

Week-on-week, PSEi sank 6.86 percent or 459.69 points to end at 6,242.26, marking the largest weekly drop for the main index this year.

The week’s highlight was the 6.75-percent or 442.57-point plunge on June 13, which is the bellwether index’s deepest single day drop since sinking by a record 12.27 percent on Oct. 27, 2008 at the height of Lehman Brothers’ bankruptcy that resulted in the global financial crisis.

Foreign fund managers dumped local stocks as part of a global realignment of investments given worries that US Federal Reserve will pull out its stimulus program late this year.

“Fed may have done all markets a favor by creating a healthy correction and allowing us to re-enter the stock market at great discounts,” said brokerage firm DA Market Securities Inc.

“The recent inflation and unemployment data say that the US economy has not crossed the line to end quantitative easing,” DA Market added.

Foreign funds are flowing out of the Philippines and other emerging markets amid the potential pullout of the US Fed’s $85-billion monthly bond buying program that has been jacking up liquidity.

Concerns still linger ahead of US Fed’s policy-setting meeting this week. On Friday, the Dow Jones industrial average shed 0.7 percent or 105.90 points to 15,070.18 while the broader Standard & Poor’s 500 index dropped 0.59 percent or 9.63 points to 1,626.73.

For this week, investors should be busy looking for bargains following the recent bloodbath.

“The principal activity investors should be undertaking amid all the noise is to search for pricing anomalies the recent volatility has created,” Calaycay said.

The challenge is balancing fears and opportunities created by the recent rout in the stock market, Calaycay said.