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Shares to move sideways ahead of BSP meeting

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PSE BGC board

By Arra B. Francia, Reporter

SHARES may move sideways in the week ahead as investors await the results of the local central bank’s policy meeting.

The main index dropped 0.96% or 73.44 points to 7,529.54 on Thursday, staying mostly in negative territory during the three-day trading week.

Week on week, the Philippine Stock Exchange index (PSEi) lost 3% or 211 points, pulled down by the property sub-index which slumped 5.5% and financials that dipped 2.3%. Net foreign outflows averaged to P1.3 billion, surging 230% from the week before.

Local markets were closed on Tuesday and Friday for the Independence Day and Eid’l Fitr holidays, respectively.

Eagle Equities, Inc. Research Head Christopher John Mangun noted this was the biggest foreign outflow in a week this year, noting the impact of the US Federal Reserve’s decision to hike interest rates by 25 basis points.

“The Philippines is included in the MSCI Emerging Market Index along with Argentina and Turkey. Investors are speculating that the EM index will go lower and since we are a part of that index, they will have to sell everything on the list thus the huge foreign selling this week,” Mr. Mangun said in a weekly market report.

This week, investors will be looking at the Bangko Sentral ng Pilipinas’ (BSP) policy meeting on Wednesday. Officials are expected to react to the Fed’s rate hike.

Online brokerage 2TradeAsia.com said the US central bank’s decision last week indicates the improving strength of the world’s largest economy, which can support demand for Asia’s exports.

“To stave off an expected capital outflow from the Fed rate hike, BSP officials will need to review all arsenals that may not necessarily lead to an adjustment in rates. The options may include forex intervention, liquidity adjustment, even moral suasion,” 2TradeAsia.com said in a weekly market note.

Tensions among the Group of Seven (G7) nations, however, could keep investors on the sidelines, unless the group of industrialized nations come up with decisive terms for an acceptable trade accord.

G7 includes the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom.

Meanwhile, Eagle Equities’ Mr. Mangun said the PSEi would have to break its heavy resistance of 7,900 before it heads back to an upward trend.

“There is strong indication that the index will bounce off the 7,500 support level and test resistance at 7,800 which it has been doing for the last 6 weeks. The index must break the heavy resistance at 7,900 before we can confirm this reversal. If we don’t start to see a pickup in volume, the PSEi may continue in this congestion area indefinitely,” Mr. Mangun said.

2TradeAsia.com placed the index’s immediate support from 7,400 to 7,450, while resistance will play from 7,550 to 7,600.