Shares seen sideways ahead of Christmas break

LOCAL SHARES may trade sideways in the week ahead amid a lack of leads and as investors go on break for the Christmas holidays.

The 30-company Philippine Stock Exchange index (PSEi) eked out a gain of 0.01% or 1.45 points to close at 7,524.37 last Friday. On a weekly basis, the main index was up 0.85%.

The counters for holding firms and services lifted the market as they gained 1.93% and 1.33%, respectively, for the week. Turnover improved by 2.08% to P8.88 billion last week, while foreign investors were net buyers at P796 million, marking the third straight week of foreign inflows.

Eagle Equities, Inc. Research Head Christopher John Mangun noted that the PSEi’s breakthrough to the 7,500 level was “exactly what the market needed,” citing the target for the index to break above its 7,630 resistance for a possible close above 7,700 this year.

“However, this will all come down to whether investors will continue to trade and not go on early vacation. If turnover value is low for the week then we may see it trade sideways and stay within the range at 7,400-7,600,” Mr. Mangun said in a weekly market note.

“But if foreigners continue to be net buyers, there is a strong possibility that we end the year closer to 8,000 rather than 7,500.”

For online brokerage 2TradeAsia.com, the PSEi could see volatility in the coming days since fund managers will “retool their portfolio.”

“No new leads might be in store at the fiscal front, with Congress set to adjourn for their holiday break this week. However, more corporate actions ahead of 2019 prospects would be at the forefront, specifically on debt restrategies and inventory loading,” 2TradeAsia.com said in a weekly market note.

It added that some companies may close the year with prospects for mergers and acquisitions, particularly those with plans for backdoor listing.

On the international front, investors could look at the US Federal Reserve’s policy-setting Federal Open Market Committee’s (FOMC) policy meeting on Dec. 18-19. The committee’s decision could signal whether the global rate hike cycle will soon come to an end.

“Officials might give leeway to resolve the ongoing trade relations between US-China, which could significantly influence both nations’ economies. If a status quo is upheld by US FOMC, that would lead to a more dovish Fed and improve lending liquidity, at least in first quarter 2019,” 2TradeAsia. com explained.

The country’s own central bank also had its last policy meeting last week, where it chose to maintain policy rates on signs that inflation has already peaked. Benchmark interest rates remain at a nine-year high of 4.25-5.25%.

Eagle Equities’s Mr. Mangun placed the market’s resistance at 7,630 to 7,700, while support is at 7,350 to 7,500.