Market to test year’s lows, say analysts

With its consistent downtrend, the market is precariously heading to test the year’s lows as the uncertainties in the US-Iraq situation continue to cast dark clouds on investor sentiment, analyst said.

"With a host of local and external concerns, the market may headed south towards the year lows. Bargain hunting may come in at the 1,090 support level but it is likely to remain thin," said Jose Bistan Jr., research head of AB Capital Securities.

For the third consecutive week, the main index landed in the red, ending another 18.28 points or 1.63 percent lower week-on-week to 1,101.64 at Friday’s close. The Phisix touched its lowest level for the year last Aug. 23 at 1,087.26.

Vistan said the strength of the major support level will depend on the near term developments especially from abroad. Besides Iraq, he said investors should also look at the US jobs report which will provide the key in terms of providing a preview on the health of the US economy.

"Any sign of weakness in the US economy raises the risk in the market as it also means that our economic recovery will get pushed further," he added.

According to a report by F. Yap Securities, bargain hunters might opt to wait for more signs on the resiliency of the 1,100 support target before positioning at the bourse, given the negative overhang of the brewing tension between the US government and Iraq.

"Several investors are also waiting for significant catalyst that could prod them to reallocate more funds towards equities investing, as competition for intra-day trades has gone stiffer in favor of foreign exchange-related trades," the report said.

Vistan added while the fourth quarter tends to be a good time for stocks to move up, with lots of investors getting optimistic for the coming year, this is anchored on a different note due to the risks of war in Iraq and related geopolitical uncertainties.

"Even if we manage to hold support, we’re still in a major downtrend and we’ll probably go sideways from there," he pointed out.

He said a resolution with Iraq is needed for the markets to rally substantially and this was shown when the Dow surged after Iraq agreed last Tuesday to the return of weapons inspectors, adding that a more ideal catalyst will be a quick attack and the end of the reign of Saddam Hussein.

Last week, investors suffered from a spate of negative events and a host of uncertainties, leaving them demoralized, hence resulting in lackadaisical trading on thin volume.

"Investors remain worried about the same issues that have been troubling them in the past weeks: sluggish global economic growth, company profits, and the possibility of a war against Iraq. Adding up to these concerns were the latest bombing incident in Mindanao, the weakness of regional currencies and the meltdown in the global equities markets," Vistan said.

On the corporate front, index heavyweight PLDT also provided a drag in the market as its share price dropped following news the Gokongwei group has backed out from its offer to acquire First Pacific’s 27.7-percent controlling stake in PLDT as well as majority control of Bonifacio Land Corp. (BLC).