Shares to move sideways on likely thin volume

LOCAL EQUITIES may trade sideways in the week ahead as volumes are seen to thin due to the shorter trading period alongside expectations for the US Federal Reserve to maintain rates.

The benchmark Philippine Stock Exchange index (PSEi) jumped 2.41% to 7,766.47 on Friday, buoyed by the gains of listed food and beverage firm San Miguel Food and Beverage, Inc. The company recently announced its plan to raise up to P142 billion through a follow-on offering by yearend, which sent its stock skyrocketing by 18.7% week on week.

Analysts are looking at whether the main index can break through a resistance of 7,800 to determine its movement in the following days. Eagle Equities, Inc. Research Head Christopher John Mangun said should the PSEi breach this level, it could easily climb back to the 8,000 mark.

“However, there are only four trading days [this] week and we may see lower volumes. If this happens, then we may see it trade sideways or come back down to support at 7,600,” Mr. Mangun said in a weekly market report.

Local financial markets were closed yesterday in commemoration of National Heroes’ Day.

Leads for the week include the statements made by Fed Chairman Jerome H. Powell during the Jackson Hole symposium over the weekend, which serves as an annual retreat for bankers focusing on global economic issues.

“There is no indication that the US Federal Reserve will be raising interest rates at the annual Jackson Hole symposium. Nevertheless, the Fed’s hawkish stance may continue to strengthen the dollar and we may see foreign funds continue to flow out which will continue to hurt emerging markets,” Mr. Mangun explained.

Meanwhile, online brokerage firm 2TadeAsia.com is keeping its eyes on the tariff row between the US and China.

“The trade round discussion may unsettle some, but there are those who embrace the challenges it brings. Differing expectations on the outcome of talks definitely spell volatility for equities, and any trading range would still be worth looking into,” 2TradeAsia.com said in a weekly market note.

Both the US and China just slapped tariffs on $16 billion worth of traded goods on each other last week, amid ongoing talks between two of the world’s largest economies.

Negotiations last week failed to make any major progress on the trade spat, with China saying that it will “resolutely respond to the unreasonable measures” taken by the US. The two sides, however, were reported to have “exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship.”

2TradeAsia.com placed the PSEi’s immediate support at 7,700, while resistance is pegged from 7,850 to 7,950.