Lackluster trading expected this week

Trading is expected to be lackluster this week given renewed concerns over the tightness in the credit markets.

Ron Rodrigo, research head at DBP-Daiwan Securities, said investors are expected to remain on the sidelines as they monitor developments overseas prior to plotting their next move.

Last week, the PSEi fell 206.7 points or 5.52 percent week-on-week to close at P3,538.69 as investors once again became wary following the Federal Reserve’s rate cut.

The Fed last week lowered interest rates and announced a plan to align with other key central banks and offer liquidity to pressed lenders around the world.

But while it wants to stimulate the US economy and make lending easier among banks wary of faltering debt, the Fed also has to keep an eye on inflation.

Prince Yeung of AB Capital said while the local economy remains strong, it has been largely overshadowed by more pressing global concerns.

The BSP will hold a meeting  this Thursday to determine whether or not to cut local rates. “So far, the BSP has followed the decision of the Fed the last two times it met. However, it will be hard pressed to do so again. A rate cut by the Fed always gives the BSP room to cut its own rates but the 10 month high inflation level of 3.2 percent for November will be a  Detriment.

“Historically, rate cuts serve as positive catalysts that enable the market to move up. Even if the BSP decides to cut its rates next week, it may not affect the market too much. Similar to last November’s rate cut, local investors may focus more on external factors,” Yeung said.

The PSEi is set to test the support of 3,480.