PHL stocks seen sideways after Fed symposium

LOCAL SHARES will continue trading sideways this week, with the market to take its lead from Wall Street following speeches by key central bankers at a Federal Reserve-led economic symposium in Wyoming.

The Philippine Stock Exchange index (PSEi) climbed by 0.12% or 10.21 points to finish at 8,015.14 last Friday on profit taking.

The broader all-shares index likewise rose 0.19% or 9.26 points to close at 4,749.06 at the end of the week.

“Attention is in place on US markets’ reaction over Friday’s results from Jackson Hole economic symposium, with special emphasis on whether or not authorities would be able to achieve their 2% inflation goal,” online brokerage 2TradeAsia.com said in a weekly market note.

US Federal Reserve chief Janet L. Yellen’s speech at the annual meeting of central bankers in Jackson Hole, Wyoming focused on financial stability while giving no hint on monetary policy, leaving the prospect of more interest rate hikes up in the air. She said the reforms put in place after the 2007-2009 financial crisis have strengthened the financial system, without impeding economic growth.

Meanwhile, a speech by European Central Bank chief Mario Draghi gave little guidance on tapering the bank’s bond holdings and heralded globalization over protectionism.

Last Friday, the Dow Jones Industrial Average rose 30.27 points or 0.14% to end at 21,813.67; the S&P 500 gained 4.08 points or 0.17% to 2,443.05 and the Nasdaq Composite dropped 5.68 points or 0.09% to 6,265.64.

On the local front, the brokerage cited the government’s inability to explain where it will get the funding for its massive infrastructure program as one of the factors preventing the main index from climbing to a new all-time high.

“How to fund the local government’s $1.13-trillion infra[structure] plan for 2018 is among the near-term ‘caps’ why the market is unable to trounce beyond its present trading band.  Legislative leaders need to focus in approving and detailing a sustainable economic map for the Philippines, especially after the fiscal deficit for the first 7 months hit P205 billion (+20% year on year),” 2TradeAsia.com said. “This could incite expectations for increased pressure to raise local interest rates.”

The government incurred a fiscal deficit of P50.51 billion in July, bringing its seven-month deficit to P205 billion.

“Despite the challenges, the Philippine’s prospects remains encouraging, given fiscal and monetary leaders’ goal to improve competitiveness and productivity. Concrete details are keenly awaited however, as several large-caps’ capex (capital expenditure) initiatives and timing are dependent on government’s project priorities and timeline,” the brokerage added.

Analysts placed the PSEi’s immediate support for the week at 7,950, while resistance should be within the narrow range of 8,050 to 8,080. — A.B. Francia with Reuters