Events in Europe to determine stock mart direction this week

MANILA, Philippines - The dark clouds hanging over Europe and the absence of fresh leads are expected to keep investors sidelined this week.

Global markets wiped out the year’s gains last week as the ongoing political and financial turmoil in Greece has kept investors skittish about its inability to remain in the euro zone.

The European Central Bank has already announced it will discontinue providing liquidity for Greek banks since it failed to recapitalize. The withdrawal of financial support might lead to the demise of Greece.

The PSEi closed below the psychological support of 5,000 for the first time in 10 weeks, shedding a total of 278 points or 5.4 percent to finish at 4,879.42.

The week’s decline brought the index’s valuation to 16.43x price earnings ratio and the market’s year-to-date advance to just 11.61 percent from a high of around 18 percent.

 “Where the PSEi is heading next week will be determined by events in Europe. The index dropped four out of its five trading sessions and bought us to below 5,000. With the uncertainty whether Greece will stay or leave the European Union, its impacts will definitely create another ripple effect to global markets and economies,” said Maria Arlysa Narciso of AB Capital Securities.

 Accord Capital Equities Inc.’s Jun Calaycay said the unwinding of the earnings season leaves investors with less reason to stay positive on equities in the absence of local positive news.

 “Delays in the Public-Private Partnership projects bids and awards, fears of an economic backlash from the tensions with China on territorial questions, and the uncertainty of the Aquino government’s policy on the mining sector will hound the bulls, which traditionally may be looking to shift funds to second- and third-tier counters driven by corporate stories,” Calaycay said.

Narciso said the major pullback provides investors a good chance to start scouring  bargain stocks and issues which consistently deliver growth each year.

“While full year performance seems to be on track for some, we remain selective on which industries we think will do remarkably this year and pick those which will benefit from current economic fundamentals. We are keeping our eyes on properties which will benefit from a low rates environment and construction due to infrastructure spending in the next years,” Narciso said.