Election jitters to drag down PSEi

MANILA, Philippines – Uncertainty arising from the May 9 presidential elections is likely to cause jitters in the market in the coming week.

The Philippine Stock Exchange index (PSEi) may settle below 7,150, said BDO chief market strategist Jonathan Ravelas.

“Chartwise, the break below the 7,150 levels puts the 6,900 to 7,000 levels at risk. Any pullback, if any is limited to the 7250.00 levels,” Ravelas said.

The PSEi fell 1.32 percent to settle at 7,159.29 weak-on-week. It dropped to as low as 7,122.76 last week.

Ravelas said investors remained on the sidelines ahead of the policy meetings of the US Fed and the Bank of Japan (BOJ).

The unexpected decision of the BOJ to keep from injecting additional stimulus into the Japanese economy, and the Fed’s stance to keep interest rates unchanged further weighed on  the  market.  Other factors that led to the market’s weakness  is  the  uncertainty  arising  from  the May 9 presidential elections,” he said.

2TradeAsia.com, in a commentary, said markets would be on tight watch whether or not the voting process would be held in a peaceful manner, given its direct impact on the country’s political risk premium weighting.

Regardless of outcome, seasoned players are aware of the long line-up of capital-intensive undertakings.

Investors would also be looking at fiscal support and whether or not these painstaking investors would be allowed to recover their investments via “reasonable” tariffs, especially in areas tied to infrastructure, power, utilities and mining, among others.

“If these major elements are fulfilled, job-creation follows.  And, when more jobs are created, the economic growth cycle is upheld, with prospects for another credit rating upgrade.  Over the short-term, expect political colors to emerge with no clear-cut guides yet how political sides would blend,” it said.

2TradeAsia said volatility would likely prevail, with foreign funds likely to remain at bay.

“The release of better-than-expected inflation for April might provide some boost, but would likely be overthrown by the emerging winner in the presidential race.  Just like the adage of ‘vote wisely,’  players are aptly recommended to ‘trade prudently.’ Immediate support is 7,100, secondary at 7,000, resistance 7,200-7,250,” 2Trade Asia said.

First Metro Investment Corp. president Rabboni Francis Arjonillo said  the looming presidential elections would indeed have an impact on the market.

“We continue to have positive outlook on Philippine equities.  However, for the short term, the recent run-up, uncertainty on looming Presidential elections and unsupportive market metrics (valuation and foreign flows), suggest a pullback and an increase in volatility,” he said.