Market seen to remain lethargic

MANILA, Philippines - Trading will remain lethargic this week as fears of a US relapse into recession and festering euro zone debt crisis keep investors on the sidelines.

Last week, the Philippine Stock Exchange index (PSEi) fell 46.84 points or one percent to close at 4,346.07 as investors continue to grapple with negative developments overseas.

“The range of 4,300 to 4,400 has held mostly due to the uncertainty surrounding the problems of the US and the Eurozone. The range is not expected to be broken next week. The debt crisis in the Eurozone will persist while the US is still in the midst of looking for a solution to help their economy,” said Prince Anthony Yeung of AB Capital Securities.

Amid worries about the darkening outlook for the global economy, gold has propelled to a series of records in recent months due to its appeal as both a safe haven and hedge against inflation.

Today also marks the recomposition of the PSEi with the comebacking San San Miguel and first-timers SMDC, Semirara Mining, Cebu Air, and Belle joining the roster of blue chip firms.

These five companies replaced Lepanto, Filinvest Land, First Philippine Holdings, Security Bank  and ABS-CBN.

“While the local stock market is seen to move within a tight range in the short term, the relatively better economic foundation translates to a better outlook in the medium to long term,”Yeung said.

The government announced last week that inflation hit 4.3 percent in August, still within government expectations, allowing the Central Bank to keep interest rates at same level.

“Economic growth, however, has some cause for concern. The first half GDP growth has fallen short of expectations and the consensus is that the government has to step up spending in order to help spur the economy. The first half budget deficit was way below the set ceiling as a result of underspending. The much anticipated PPP (Public-Private Partnership) projects have also been delayed,” Yeung said.