Stocks seen trading sideways this week

MANILA, Philippines - Local stocks, in danger of posting a yearly loss for the first time since 2008, are expected to trade sideways this week due to the absence of buying leads in an environment dominated by pessimism.

All eyes will be on the US Federal Reserve meeting late this week that will shed light on the feared tapering of the monetary stimulus, analysts said.

“We expect the coming week to be muted and lacking in direction as all eyes turn to Fed’s meeting on Dec. 17-18,” Maria Arlysa E. Narciso, an analyst at AB Capital Securities Inc.

“A consolidation is not ruled out as we have no strong catalyst to move higher,” Narciso said.

Freya B. Natividad, investment analyst at Papa Securities Corp., said the 5,700 level would be retested, with chances of a recovery to be weighed down by thin trading.

“Some would definitely cash out given the upcoming holidays,” Natividad said.

Week-on-week, the Philippine Stock Exchange index (PSEi) retreated 4.12 percent to 5,767.13, steeper than the 3.12-percent decline a week ago.

The main index, which fell for four trading sessions last week, closed thrice below the end-2012 level of 5,812.73.

The improving economic condition of the US bolstered chances that the US Fed will cut back its $85-billion monthly bond buying program earlier than expected as the economy is already strong. The tighter monetary policy will lead to the decline of liquidity in financial markets.

Natividad said the seasonal “Santa Claus rally” is so far absent as the stock market is on a short-term downtrend.

However, there could be episodes of window dressing.

“Yearend window dressing may provide the final push that will let the PSEi close above 5,800 this year,” Narciso said. Window dressing is a strategy of trading participants that aims to make stock prices look more attractive ahead of their yearly portfolio report to clients.

The bellwether index could also retrace its path back to 5,800-5,900 if there is enough confidence in the market or in large-cap issues, Narciso said.

In the meantime, Narciso adviced investors to wait and see “how the global markets will take the decision or outcome of Fed’s meeting.”

For this week, Natividad pegged the initial support level at 5,600 and resistance at 5,800 while Narciso said the next immediate support is 5,445.