Analysts said stock trading will be subdued this week with a downward bias as investors continue to worry about the political climate.
Adding to investors’ fears is the recent court ruling suspending Bangko Sentral ng Pilipinas Governor Rafael Buenaventura and four other officials over a case involving the closure of Urban Bank three years ago. The five BSP officials were meted a one-year suspension without pay by the Court of Appeals.
In its weekly market outlook, online stock investment portal 2tradeasia.com said: Investors are expected to adopt a cautious stance at home, as they wait for clearer signs how authorities can effectively quell inhibitions on the leadership vacuum in the domestic financial system. The issue has added volatility at the foreign exchange mart, on top of the investigation trail to the foiled coup plot."
Worries of a leadership vacuum in the Central bank caused the local markets to react negatively. The peso breached the 55 to $1 level, the first time in almost five months.
Buenaventura has been credited for the relative stability of the peso, inflation and the healthy international reserves level of the country. He was recently named as one of the top four central bankers in the world by US-based Global Finance magazine.
Philippine Stock Exchange president Ernest Leung views the ourt ruling with grave concern. "This is disturbing. It could have repercussions on the financial market."
AB Capital’s Jovis Vistan said a leadership vacuum can create a sense of uncertainty in terms of monetary policy.
2tradeasia.com said while it believes that the aberration on the peso will be temporary, the market will have to find stronger catalysts to support an expected economic recovery for second half of the year.
"Attention is bound to stay selective, as long-term fund
managers aim for attractive trading support zones in stocks that are first to recover once the selling rout dissipates," 2tradeasia.com said.
As of the end of last week, the main index inched higher by 15.17 points to end at 1,248.05, aided by some favorable second quarter corporate results and the lifting of the state of rebellion. The market had a strong start but momentum slowly drifted lower as the week progressed.
"The lifting had a psychological soothing effect on sentiments, but was not considered a catalyst for investors to revert back to their bullish mode. A major factor that has kept optimism at bay has been the weakness in the local currency," Vistan said.
Vistan said although security concerns linger the tension has started to ease. Nevertheless, he expects share prices to continue its correction as some stocks are near their resistance levels and buying has been thin.
Concerns over the authority vacuum at the BSP caused interest rate-sensitive sectors to decline, led by property and banks. BPI fell P1 at P45.50 per share, after the bank’s management said discussion with idle asset buyers have been put on hold, due to pricing disagreements.
Meanwhile, BPI Securities said investors are likely to keep short positions until all political and security concerns are alleviated as the market remains tentative and vulnerable to external shocks. BPI Securities said the market needs to close above the 1308 level, if it is to gain confidence. This would signal that the market is likely to test the 1,400 level.