LOCAL SHARES may rise in the week ahead as investors await the results of the US Federal Reserve’s policy meeting and amid caution on the onset of the so-called ghost month.

The Philippine Stock Exchange index (PSEi) plunged 1.06% or 88.19 points to close at 8,183.99 on Friday, ending the week with a 86-point decline or 1.04%. The mining and oil and industrial counters pulled down the market, falling 3% and 2%, respectively.

Turnover for the week slowed by nine percent to P6.67 billion on average, on the back of average net outflows worth P3.6 million.

“With the index managing to hold up above its 20-day moving average support at 8,170, possibility for it to go back to its highs at 8,400 still remains alive. Catalyst to watch for [this] week should be the Fed’s meeting where they’re expected to cut by 25 basis points,” Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said in an e-mail.

The US Federal Open Market Committee is set to meet on July 30-31, with consensus pointing to a 25-basis-point reduction. Officials are seen to consider low inflation and low unemployment rate in coming up with their policy decision.

This will coincide with the meeting between US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer with China’s Vice Premier Liu He, scheduled to start on June 30.

“(T)hat could either support hope or bring about frustration. While positive outcomes are favored, it would be prudent to ride on sentiment swings, given uncertainties on its outcome,” online brokerage 2TradeAsia.com said in a weekly market note.

Apart from these geopolitical issues, investors will look at the earnings reports of index-member firms. BDO Unibank, Inc., Manila Electric Co., Aboitiz Equity Ventures, Inc., Aboitiz Power Corp., Metro Pacific Investments Corp. and Ayala Corp. — or about 23.2% of the PSEi basket — will disclose their earnings for the first half of the year this week.

2TradeAsia.com also pointed out that this week will see the start of the Chinese ghost month, where Chinese investors historically hold off on trading. At the same time, this period is typically when most global fund managers from the US and Europe also take their annual vacation.

“For now, some might be prompted to go on hiatus mode, with the onset of the Lunar calendar’s Ghost Festival (Aug. 1-29). This window presents ripe opportunities to position gradually, timed with an expected pick-up in economic activity in the fourth quarter,” the online brokerage said.

2TradeAsia.com placed the market’s immediate support from 8,070 to 8,100, with resistance at 8,300 to 8,350.

On Wall Street, robust earnings from Alphabet and Starbucks pushed the S&P 500 and Nasdaq indexes to record highs on Friday, with support from data showing US economic growth slowed less than expected in the second quarter. — Arra B. Francia with Reuters

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