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Business

Market seen trading sideways on concerns over FPJ presidential bid

- Zinnia B. Dela Peña -
The market will trade sideways this week with a downward bias as investors are expected to steer clear of active trading on concerns that a popular local movie actor may run for President next year.

High-level opposition officials are wooing action star Fernando Poe Jr., widely known as FPJ, to run under a united opposition banner. Some senators have hinted that FPJ would soon announce his intention to join the 2004 Presidential race.

In its online weekly market report, BPI Securities said the market will remain in consolidation with investors awaiting further developments in the political front and the third quarter results of listed companies.

"Long-term prospects for the market have clouded given the recent political events. Investors may opt to adopt a more cautious stance, particularly as we near elections next year," BPI Securities said.

The major markets are waiting for the announcement of FPJ as to whether he is running for President or not. Foreign investors tend to be callous when making their investment judgments and an announcement for FPJ to run is viewed as negative.

Jose Vistan, analyst at AB Capital said the negative breadth and the lack of enthusiasm in trading activities could be a prelude to an interim correction within the context of the market’s overriding major uptrend.

"The pullback is likely to be modest given optimism on the global economy. Some traders have made a lot of money in the market since May. They’re looking for an excuse to take profits, and they’re getting it. Some investors are already cashing in profits ahead of the 3rd quarter corporate earnings reporting season, as many believe the strong earnings outlook has pushed stocks as high as they can go," Vistan said.

"From a technical standpoint, a correction from perceived overbought levels should be healthy so stocks can then advance to healthier levels in the longer term. We believe the equity market gains will continue in the longer term with stronger growth expected after the elections," Vistan added.

The market’s positive momentum lost steam as shares were sold down last week following reports that FPJ would soon announce his Presidential bid. Besides political worries, the market’s momentum was also fettered by an overdue technical correction, the weakness of the major markets abroad and the depreciation of the peso.

The PSE composite index fell 3.93 points to 1,363.40, also partly due to the lack of fresh leads.

A sharp sell-off in Japan and Hong Kong coupled with a correction in the US markets pressured local shares. Last week saw the Nikkei having its biggest single day decline since Sept. 12, 2001, the day after the terrorist attacks. Wall Street also finally succumbed to a correction due to some earnings disappointments. Most of the markets in the Asian region were also down because of the correction in the two major bourses.

The peso was weighed down by reports that FPJ would soon follow a similar path taken by deposed President Joseph Estrada. The local currency tumbled to as low as P55.33 against the US dollar, its lowest level in almost two months. With pressures from the foreign exchange market, domestic interest rates were also being projected to go up. National Treasurer Sergio Edeza said the yield of 91-day Treasury bills will be allowed to rise to six percent at next week’s biweekly auction.

Analysts said the fate of the market now lies on how the companies are going to report their results for the third quarter.

"The market is still consolidating within a rectangle channel with support at 1,353 and resistance at 1,388. So far, the market has yet to give a definitive indication of its short-term trend; a break below the lower limit would suggest possible decline up to 1,330 to 1,340," BPI Securities said.

CORRECTION

FERNANDO POE JR.

FPJ

JAPAN AND HONG KONG

JOSE VISTAN

MARKET

NATIONAL TREASURER SERGIO EDEZA

PRESIDENT JOSEPH ESTRADA

VISTAN

WALL STREET

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