Light trading Expected this week

MANILA, Philippines — Trading volume at the stock market is expected to be light because of the holiday break, analysts said. 

“The choices are set – a growl from a bear, bellow from a bull, or stillness before a hawk makes its screech. Immediate support is at 7,350 to 7,400 level, resistance may settle at 7,550-7,600,” said 2TradeAsia.com in a commentary.

Last week, the PSEi closed 44 points weaker at 7,479. This was led by mining and oil, which was down three percent and financials, which also lost 1.64 percent. 

On the other hand, the market saw gains in services, which rose 1.4 percent and industrials, which rose 43 percent. 

Investors took money from the market last week.

“Profit-taking took hold during the week with the peso weakening to as much as 53.25 to the dollar after the Fed surprised markets with its 25 basis points rate hike,” 2TradeAsia said.

Moving forward, 2TradeAsia cautioned against volatility ahead following the decision of the US Fed.

“The Fed’s surprise move to raise benchmark interest rates by another 25 basis points connotes increased funds flow volatility,” 2TradeAsia said.

Against this backdrop, it said that appetite for fixed income instruments is back as comparative instruments scale up on expectations of increased fiscal and corporate borrowings for 2019.

Thus, it said investors should consider the impact of this new developments on the debt of listed companies.

“While higher benchmark interest would take its toll on debt charges, it would be prudent to sift through listed firms’ debt profile to see which ones are variable versus fixed. Fixed interest notes are better shielded in situations when rates move up, thus protecting earnings that could be distributed as dividend,” it said.

It noted that while equity funding is the cheapest option, listed firms may utilize other means to support their capex rollout for the coming year.

At the same time, 2TradeAsia said that for as long as business models meet investors’ expected dividend yield, capital appreciation potential is present in equities to counter future inflation risks. 

The Philippine Stock Exchange Inc. has clarified that there will be regular trading, clearing and settlement operations on Wednesday, Dec. 26.

The PSE also said that there would be trading on Jan. 2, 2019.