Market seen flat on interest rate concerns

The stockmarket is expected to trade sideways this week with a negative bias, given continuing concerns on rising interest rates and higher commodity prices.

"Investors remain concerned on what Bangko Sentral ng Pilipinas officials will be doing in its next policy meeting given past week’s adverse local developments," said AB Capital Securities in its weekly online market report. Overnight borrowing and lending rates have been unchanged at 7.5 percent and 9.75 percent since the third quarter of last year, while T-bill rates slightly moved up to five percent in the last auction.

The peso has weakened near the P53:$1.00 level and threats of inflation further creeping up arose as crude oil continued to rise above $71/barrel.

Global markets continued to roll from the interest rate punch in the US knocking down the PSEi back to the 2,240 level before recovering to 2,300 last Friday. Week-on-week, the PSEi lost 2.5 percent in value.

Also contributing to the market’s drop were reports of massive redemptions from Unit Investment Trust Funds and the continued rise of oil prices in global markets.

Last week, oil dropped 4.9 percent on fears that higher raw material prices would raise global inflation. Commodity demand has surged year to date because of economic growth in China and India as well.

PCCI Securities president Francis Liboro said the market may fall to 2,200 but expects it to bounce back to 2,350 following the sell-off last week.

AB Capital Securities said the upside maybe limited as some fund managers are still in a profit-taking mode. "It will be a technical rebound within a correction of the long term uptrend. Most of the major big cap blue chip and second line issues are trading near their major support levels. Stocks have either touched their 50-day exponential moving average line or the lower band of their major trend lines," AB Capital Securities said.