Trading seen to be cautious this week with more sellers expected

With stocks continuing to feel the pressure of the terrorist attacks on the US, the market’s movement will remain on hostile territory as it awaits the results of an impending counter strike by the Americans, analysts said.

"Market confidence is very low at this stage as investors remain uncertain of what will happen next," Roberto Cano of BPI Securities said. "The negative bias in US equities and the possibility of war have kept investors sidelined. Investors are likely to keep liquidating their positions to hold on to cash as long as this period of uncertainty exists," he added.

Jose Vistan Jr. of AB Capital Securities pointed out that if the market remains weak and vulnerable this week, the newly-revised main index may head down towards the 1998 low of 1,075 points.

Last week, the local bourse followed Wall Street’s lead, settling lower on miniscule volume after a period of volatile trading following the terrorist attacks in the US. The 30-company Phisix fell 73.57 points or 5.95 percent week on week to 1,162.85, its lowest level since October 1998.

"By now, the word uncertainty will be the most overused word among investors and market players. Still, selling has been tempered by the uncertainty that a successful counter strike may help inspire a rally. An uncertainty is also the primary foe of the market as it keeps bargain hunters from buying oversold issues," Vistan said.

Cano said if some positive development breaks over the weekend, especially a peaceful resolution of the US situation, then this could induce an upswing in the market. On the other hand, a prolonged period of uncertainty will keep buyers on the sidelines.

"At the moment, cash is king. Investors want some liquidity to take advantage of lower prices when the global situation resolves itself. However, the market is already oversold. There could be some support as the market trades within the support range of 1,100 to 1,150," he said.

He said since investors usually overreact to bad news, a situation such as a war creates an opportunity. "Once most of the emotional selling has exhausted itself out in the markets, we may see a technical rally emerge. But no technical rally can be sustained until we see a recovery in the major economies," Vistan added.

Looking ahead, he said it would be extremely difficult to assess the effects of the terroist acts and the consequent retaliations on global business. "As such, far more investors are sitting on the sidelines waiting for events to unfold," he noted.

This, Vistan said, has caused the key index-linked issues to breach major support levels. "One thing certain about the impact of the terrorist attacks is that nothing positive would result from it. There is absolutely no upside to it but rather just downside from an overall viewpoint. This adds to the difficulty that has already been present even before the tragic events," he said.