Trading to remain tentative as investors still hesitant to go on a buying spree

The local equities market began the month on a tentative note and that’s how trading is likely to end up this week as investors remain wary of the external and domestic security concerns that have plagued the financial markets since last year.

AB Capital Securities research head Jose Vistan Jr. said trading will remain thin and sluggish this week as there will be a continuation of the same external concerns plus the renewed security worries.

"Because of these worries, investment decisions will be put off as investors will be hesitant to commit. People don’t want to put money in when we have nothing but uncertainties on the local and external front," he added.

In a report, RCBC Securities also observed that the market seemed just standing still, turning in a flat performance last week "because there was a lack of impetus to move."

The main index closed at 1,014.79 points last Friday, lower by 4.54 points from a week ago.

Vistan said stocks managed to book minimal losses despite facing a major setback with the latest bombing incident in Davao City. Volume remained light as investors were still waiting for the fate of Iraq, North Korea and the amendments to the Anti-money Laundering Act (AMLA), as domestic peace concerns and the peso depreciation continued to inflict heavy damage on investors’ confidence.

"Fortunately, selling pressures were tempered by the passage of the new AMLA and the oversold state of the market," Vistan added.

There were a handful of positive developments last week that went unnoticed. Overshadowed by the bombings, Congress was able to amend the AMLA before the March 15 deadline. The law, which was earlier rejected twice by the Financial Action Task Force (FATF), was amended to meet the acceptable standards of the FATF. Once signed by the President and accepted by the FATF, the country should be spared from sanctions and be removed from the blacklist of uncooperative countries.

The government also announced last week that collections from the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) will exceed their targets for February. The BOC was able to collect P8.05 billion against a target of PP7.24 billion. On the other hand, the BIR is optimistic that it will exceed its P27-billion target for February.

Vistan said this week technical factors will provide some support to keep stocks afloat, as bargain hunters keep an eye on oversold stocks and cheap prices.

"Although there has been a pattern of choppiness, we are already getting to the lower end of the market’s trading range. However, it would be premature to start being aggressive with the backdrop of a war," Vistan noted.

He pointed out that since the knee jerk reaction to a war will be negative as the price of crude oil is expected to surge, the start of the war in Iraq, on the other hand, will also mean the end of the waiting game. "And if the war ends quickly, we should see a recovery in the major economies and markets. The wait for Iraq has been a drag as many companies have been refraining from additional business investments until there is some resolution of the crisis in Iraq. Investors are advised to wait out this period of uncertainties," Vistan said.