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Caught In Between
by Maria Arlysa E. Narciso
Friday, June 11, 2010

The PSEi was off to a shaky start early this week as worries for the global economy took hold of the market. Europe's troubles, unfortunately, seem far from over. Hungary was the latest country to announce the possibility of a default. The local stock market reacted negatively to these developments and trekked lower for much of the week. The main index would have lost much more if not for a strong performance on Friday.

Upon week's end, the index finished lower at 3265.44, or 2.73% down from the previous week. Local developments were fairly positive and optimistic although they were ignored earlier in the week. What could be the highest point for the country was the proclamation of the victorious president and vice-president for the Philippines. Along with the hopes of brighter times for the country also came the anxiety on what policies the next administration will prioritize and implement.

In global events, Finance ministers in Europe are calling for further cuts and reform in troubled countries to bolster their economies. The latest meeting of ECB (European Central Bank) led to a decision to keep the interest rate steady at one percent. The FED in the US gave further hints that rates will be kept steady for a time. Economic activity in the nation is to improve, although at a slower pace as worries in Europe persist.

Ayala stocks, along with TEL and some power issues led the market's movement for the week. Properties and banks likewise received heavy investor attention. MPI ended lower at P2.80 or a 3.3% week on week drop despite the further expansion of its business units. AP continued to be a market mover yet ended 1.4% lower to P18.25 per share. Meanwhile, DMC performed spectacularly compared to the market as management expects significant growth in all its businesses. The stock closed 1.5% up to a price of P17.00 per share.

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The case for the Philippine economy is turning brighter and both business and consumer confidence are ticking higher, especially with the proclamation of the new administration. Locally, our fundamentals are looking better. Full year GDP growth target is expected to be revised higher as economic conditions continue to improve. Several rating agencies and international organizations have already raised their growth forecasts for the country. Inflation environment is still deemed low and favorable, allowing the Central Bank to further push for growth.

Events in Europe and in US could still have a hold over the PSEi. Worries remain in those regions for fears of another default in Europe. In case of another drop of the Dow tonight or a new negative news to pop up, the local market will only be able to react Tuesday next week. Monday was declared a holiday in celebration of Independence Day. So far, the index has been moving sideways. Despite encouraging fundamentals, technical indicators are giving sell signals. Medium term, we are expected to keep a sideways trend and at a limited trading range. Support remains at 3,150 while resistance is 3,300.

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