Market seen sideways

MANILA, Philippines - A back-to-back week of sideways trading is expected for the local stock market, with investors seen to await and digest policy indications during the president’s State of the Nation Address (SONA).

Investors want more positive leads that will push the main index past a strong resistance level, analysts said.

“All things equal, trades are seen to be held back as investors wait for the president’s SONA before a joint session of the 16th Congress scheduled half-an-hour after the market closes,” said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

President Aquino will deliver his fourth SONA today, with the market awaiting leads on the administration’s plan for the latter part of his term.

“Chartwise, expect the index to consolidate between the 6300-6750 levels in the week ahead,” said Jonathan Ravelas, chief market strategist of BDO Unibank Inc.

Week-on-week, the Philippine Stock Exchange index (PSEi) picked up 0.71 percent or 46.81 points to end at 6621.02.

Stocks traded sideways at the start of the week. But with US Federal Reserve chairman Ben Bernanke’s statement that the easing of the $85-billion monthly bond buyback program late this year is not yet cast in stone.

This diffused worries that the easy monetary policy, which has been fueling liquidity, will soon come to an end.

For this week, investors in the local bourse will need more positive signs to buy more shares.

“Strong resistance lies at 6,750 and if this level is broken, the 7000 level may be tested,” Ravelas said.

But failure to break the resistance “could trigger a sell-off and retest the 6,300 levels, initially,” Ravelas said.

Calaycay said that historically, the SONA doesn’t seem to have had any significant and immediate impact on stocks prices.

It could mean that investors “take a longer time to digest the SONA, thus the lag in discounting the message encapsulated thereat.”

Also to watch out for are follow-up movements in blue chips like Manila Electric Co. (Meralco) and diversified conglomerate San Miguel Corp. (SMC) that weighed down the bellwether index last week.

Late last week, SMC sold a 5.7-percent stake in power distribution Meralco worth P17.369 billion to various investors. The sale price of P270 apiece, a 10.71-percent discount compared with the previous closing price of P302.40, dragging the main index.

SMC’s share price also suffered a setback that pulled down PSEi on Wednesday due to a report that connected it to a “highly leveraged conglomerate” at risk of default.