Volatile trading week seen

MANILA, Philippines - Volatility will mark the shortened trading week as investors await US lawmakers’ moves to prevent an unprecedented debt default of the world’s largest economy.

But optimism from recent negotiations to increase the US debt ceiling is seen to buoy share prices, analysts said.

“The volatility and uncertainty in the market will persist until Oct. 17 (US time), the deadline for raising the debt ceiling,” Jonathan Ravelas, chief market strategist at BDO Unibank, said.

“The movements in the stock market next week will rely heavily on the decision of the US lawmakers,” Ravelas said.

For Abbygayle Estrella, equities analyst at AB Capital Securities Inc., global markets will continue to dictate the local bourse’s movements, thus fueling volatility.

Week-on-week, the Philippine Stock Exchange index (PSEi) climbed 1.55 percent or 99.32 points to 6,489.80. The main index breached the 6,500 resistance level on Friday but profit taking pared its gains.

Ravelas said the local market welcomed the ascent of Wall Street, which was relieved to see US lawmakers moving toward an agreement and was buoyed by the appointment of a new US Federal Reserve chair that will not rush the withdrawal of the monetary stimulus.

“The market will see more foreign fund flows in emerging markets as the likelihood of US tapering will not happen in the near term,” said BPITrade.com director Richard Anthony Liboro.

Coming from last week’s improving investor sentiment, optimism might pick up anew.

“The lid on optimism and the veil of pessimism should begin to lift as the previously hard-line contending positions on extending the  US borrowing limit appears to thaw,” said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

“Philippine shares should take on a positive bias this week, making an attempt to break past 6,600 en route to 6,700 as ‘conversations’ between the White House and House Republicans continue through the weekend,” Calaycay said.

The PSEi will likely range 6,000 to 6,500 this week, with a possible testing of the 6,700 level, Ravelas said.

US markets will be closed on Oct. 14 for the Columbus day celebration while the Philippines is on holiday on Oct. 15 for the Feast of the Sacrifice.

“We advise investors to stay on the sidelines as we await for major developments in the US,” Estrella said.

The resolution of the US debt ceiling issue will bring more certainty to the local bourse.

“Failure for a debt ceiling decision could drown the PSEi back to 6,240 while a favorable result this Friday could send the local index to 6,700,” Estrella said.