Stock Market

Stocks to trade sideways amid lack of catalysts

Posted on August 07, 2017

LOCAL EQUITIES are expected to continue trading sideways this week without catalysts to boost the index beyond the 8,100 mark.

The 30-member Philippine Stock Exchange index (PSEi) gained 0.71% or 56.16 points to close at 7,932.82 last Friday amid thin trading volumes for most of the week.

Week on week, however, the PSEi was down from its 8,071.47 finish last July 28.

“For this week, it might be a little difficult, because there has to be a catalyst that will push it up. And right now as you push it to that area, the market will start taking their profit,” COL Financial Group, Inc. Chief Technical Analyst Juanis G. Barredo said in an interview over the weekend.

Asked if the index could break the record high this month, the analyst explained that August is seasonally a weak month. Data from the brokerage show that the index dropped by an average of 1.6% during the month from 2003 to 2017, the biggest loss next to November, which dipped by 1.3%.

“August traditionally is a weak month. So if it can happen, then you look for potential buys after August or in November in line for the year-end break of the index. Hopefully in between August and November. But I don’t know if this week, there might be some up moves, but not the 8,136. That might be a little hard to do,” Mr. Barredo said.

The PSEi’s all-time high is at 8,127.48, which was logged last April 10, 2015.

Summit Securities, Inc. President Harry G. Liu expressed the same sentiments, saying the market will continue its sideways position.

“Market continues to go on sideways, that’s how I see it. Nothing of negative, peso and dollar is quite steady. Peso is appreciating a bit, so I don’t see anything except good news to pierce the 8,100,” Summit Securities, Inc. President Harry G. Liu said in a phone interview last week.

The PSEi’s support for this week is pegged at 7,862, while resistance is at 8,118, the analysts said.

Offshore data due for release this week include Chinese trade and inflation reports, US jobless claims data, as well as US inflation numbers.

Last Friday, the US Labor Department reported that employers hired more workers than expected in July and raised their wages, signs of labor market tightness that likely clears the way for the Federal Reserve to announce a plan to start shrinking its massive bond portfolio.

US nonfarm payrolls increased by 209,000 jobs last month amid broad-based gains. June’s employment gain was revised up to 231,000 from the previously reported 222,000.

Average hourly earnings increased nine cents, or 0.3%, in July after rising 0.2% in June. That was the biggest rise in five months. Year on year, wages increased 2.5% for the fourth straight month.

Economists expect the Fed will announce a plan to start reducing its $4.2-trillion bond portfolio at its next policy meeting in September. -- A.B. Francia with Reuters