Muted trading seen this week

The stock market may see muted trading due to the holiday this week, traders said.

Financial markets gained last week after the Bangko Sentral ng Pilipinas’ 100 basis points cut on larger banks’ reserve requirement ratio (RRR).

“Philippine financial markets gained week-on-week after the surprise 100 bps cut on larger banks’ RRR, dramatic growth in government. expenditures,” said Michael Ricafort, chief economist at Yuchengco-owned Rizal Commercial Banking Corp.

With this, the equities market also took the cue.

Last week, the market barometer Philippine Stock Exchange index rallied by 0.53 percent week-on-week to 7,926.88 as investors positioned ahead of third quarter results.

Christopher Mangun, head of research of AAA Securities, said last week was a good week for the global equities markets on continued optimism from investors after the Phase 1 deal between the US and China.

But he said investor appetite remained very cautious.

“Here at the PSE, the main index ended slightly higher despite the drop that we saw on Friday. This marks three weeks of consecutive gains. It is currently up about two percent for the month of October. It closed right at the 7,920 support area after failing to test resistance at 8,000 the whole week. Trading volumes remain extremely low with only P26.22 billion traded for the week. We saw foreign inflows again this week with P1.48 billion of net-buying. The general investor sentiment has remained very cautious as the appetite for equities continues to dwindle by the day,” Mangun said.

Moving forward, the US central bank will be deciding on monetary policy next week, with most markets anticipating a 25 basis point rate cut. This could affect investor appetite in the PSEi.

“The PSEi has been inching higher in the last two weeks on very low trading volumes, failing to breach the key-8,000 level. Foreign inflows and a lack of selling pressure allowed it to go higher, but this trend will not continue for very long. We are looking at muted trading for next week due to the holiday. It may inch higher potentially testing 8,000, However, we may see an increase in selling pressure as investors take some risk off the table ahead of the holiday,” Mangun said.

BDO Research said the market could bounce toward the 8,000 levels in the near term.

“Expect the bounce to stretch towards the 8,000 levels in the near term. Failure to try the 8,000 level could cause some profit taking and retest the 7,700 level,” it said.