Stocks likely to sustain upward movement
Share prices took a breather in last Friday’s trading but market bias remains tilted on the upside as investors take stock of the improving COVID situation and prospects of positive third quarter corporate earnings.
The main Philippine Stock Exchange index or PSEi snapped a six-day rally to slide back to the 7,200 level last Friday as profit takers took over. Still, it gained for the second straight week, by 76.15 points or 1.1 percent, to close at 7,289.61.
On Thurday, the PSEi vaulted past 7,300 to close at 7,311.72, its highest since Jan. 21, 2020.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said he sees the next important resistance levels as a gateway prior to further upside potential at 7,400 to 7,500.
Developments on the timely approval of the 2022 national budget by lawmakers to avert risk of a re-enacted budget are also on investors’ radar, especially for various COVID-19 programs and to continue to help pump-prime the economy.
This after some areas outside Metro Manila already adopted the Alert Level System from Oct. 20 to 31, 2021. These measures could translate to further reopening the economy with smaller scale lockdowns,
Moving forward, Ricafort said other factors that would affect the market include additional measures to further reopen the economy, including smaller lockdowns in other areas of the country.
Investors would also be keeping a close watch on increased vaccinations against COVID-19, which would already result in further easing of new COVID-19 local cases.
Other factors that could also help stimulate the economy include preparations for the May 9, 2022 presidential elections.
These include increased government spending, especially infrastructure, as a major pillar to the economic recovery program to help stimulate the economy in view of the start of the election ban on some public works from March 25 to May 8, 2022.
On the external front, investors are homing in on a flood of earnings reports from Wall Street’s tech and internet giants, as the high-growth stocks that have led markets higher for years face pressures from regulation, supply-chain snags and rising Treasury yields.
Strong earnings reports have helped lift the S&P 500 to fresh record highs, with the benchmark index rising 5.5 percent so far in October. In September, the index posted its biggest monthly percentage drop since the pandemic began in March 2020.
While investors expect most of the big technology firms to show robust profits, many will also be listening for indications of whether they will be able to sustain that growth. Also in focus will be any forecasts regarding supply bottlenecks, such as the chip shortage that has affected a broad swath of global industries, as well as their views on how sustainable the recent surge in consumer prices will be.
“I would expect the potential for more volatility,” said James Ragan, director of wealth management research at D.A. Davidson. “We just might get the possibility for some of these big companies to disappoint a little bit.”
The prospect of US government regulatory intervention also hangs over these behemoth companies, so investors will be keen for any insight.