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Muted trade seen as start of ‘ghost month’ looms

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PSEi_081417

LOCAL EQUITIES are expected to trade sideways this week, with the looming start of the “ghost month” seen to dampen investor sentiment alongside continued geopolitical tensions between the United States and North Korea.

The 30-member Philippine Stock Exchange index (PSEi) ended at 7,928.43 on Friday, down 0.47% or 37.82 points.

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The bellwether index was flat week on week, declining by just 0.06% from its Aug. 4 finish of 7,932.82.

“The PSEi’s attempt to move past 8,040 and sustaining this ascent could keep gauges within a narrow trading band for now, especially with the ‘ghost month’ approaching,” online brokerage 2TradeAsia.com said in a market note.

The “ghost month” is a period in the Lunar calendar when some Asian investors refrain from doing big investments or decisions that coincides with the vacation of fund managers in the West, thereby resulting in lower trading volumes.

For this year, the period starts on Aug. 22, the first day of the Chinese calendar’s 7th lunar month, and will last until Sept. 19.

The market showed minimal movements last week as the heated exchange between the US and North Korea tempered regional markets, with the latter saying its military would complete plans to fire four intermediate-range missiles over Japan by mid-August. The missiles are set to land near Guam.

US President Donald Trump issued another warning to North Korea on Friday with a reference to American weapons as being “locked and loaded.”

“Any form of diplomatic solution to this geopolitical tension would be favored, as the lack of such would keep investors on their toes,” 2TradeAsia.com said.

Meanwhile, Summit Securities Inc. President Harry G. Liu noted that the market will continue to consolidate as it has already taken into account the second-quarter earnings results. The deadline for companies to disclose their second-quarter reports is on Aug. 15.

“That’s the reason why the market continues to consolidate — those profits was already discounted by investors. That’s why the market has been trading at the level of 7,750 and a resistance of 8,100. If there are more companies with surprises, then maybe the market would surprise us by moving higher,” Mr. Liu said.

Without other developments such as updates on the passage of the government’s tax reform program, Mr. Liu said there are still no catalysts to boost the market this week.

“I think at the present moment, market conditions still show very good possibility we’ll be moving up later,” Mr. Liu said.

“Given the Philippines’ overall fundamental merits, we continue to hold the view that dips should be taken as buying windows, with an intention to extend positions over the long term,” according to 2TradeAsia.com.

Analysts placed immediate support for the PSEi at a range of 7,800 to 7,850, while resistance is pegged at 7,970 to 8,000. — Arra B. Francia with Reuters





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