Market ripe for a breakout — analysts

The stockmarket appears ripe for a breakout from a technical standpoint but the political fundamentals continue to cast a dark shadow on investor sentiment, adding more volatility to the movement of share prices this week.

This early, there are many possible scenarios in the political landscape that could impact on stock trading, at least for the week. The massive show of support for President Estrada in last Saturday’s prayer rally and his upcoming trip to Brunei on Wednesday to attend the APEC meeting are reasons enough for the pro-administration investors (led by the government financial institutions) to perk up the market.

"You might see the GFIs buying into the market again. For one thing, they will have to move the market because they don’t want to book losses at the end of the year," Albert Chua, portfolio manager of All Asia Asset Management Inc., said.

But on the downside, tomorrow’s scheduled nationwide strike by business groups, labor unions and other sectors seeking President Estrada’s ouster could temper whatever gains the market posts, as the impeachment process in Congress is set into motion.

"With this power struggle continuing to strangle an already breathless economy, expect listless trading (this week) to continue," a research report from Orion Squire Capital Inc. said.

Last week, the Phisix staged a record-setting one-day surge on Monday on expectations the political crisis gripping the country would come to an end soon, following the series of defections and resignations by key people in the Estrada administration.

But as the crisis dragged on, stocks also slowed down as value turnover dwindled from a high of P3.6 billion at the start of the week to P858 million on Friday, with transactions highly concentrated on blue chips PLDT, Meralco, SM Prime, San Miguel and Ayala Land.

The composite index closed the week at 1488.95, slightly below the 1512.58 week-high on Tuesday but well over the prior finish of 1287.85 on Oct. 31, before the extended holidays.

"The close near the week’s high puts the bourse in a position to continue its supposed breakout," the Orion Squire technical report noted. But it warned the run-up could only be an aberration "since this reversal of the trend must still be confirmed."

"A gap was created between the week ending Oct. 31 and (last) week, putting this rally in a somewhat artificial light. It is as if someone just decided to buy issues at higher prices. Thus a tendency for the local equities market to fill that gap still exists," the report said.