The information contained herein is based on sources which we believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. This firm and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.

Halfway Through
by Maria Arlysa E. Narciso
Friday, July 02, 2010

The past week marked some endings and new beginnings. In a span of six months, key events both locally and globally helped shape economies and markets. In half a year, some countries in Europe have gone through economic downfall while the US have struggled over financial regulation. However, in the Philippines, things have turned brighter especially with the inaugural of the new administration. While both the Dow and the PSEi suffered a decline for the week, the PSEi ended with less damage than the current plight of its Western counterpart. The local index lost -1.83% this week to end at 3,290.98 this Friday due to the drag of negative economic data abroad.

In the past quarter, the PSEi managed to gain 7% from its Q1 level. This is in contrast to the Dow which lost 10% for the said period. Locally, power issues were initially the top performers before they succumbed to a retreat in the latter part of the quarter. On the other hand, TEL took a backseat and was less felt during the period. As for this week, several property stocks rose in view of the incentives of the REIT law. But for the Financials, the drop of MBT (-6.34%) and other banking issues led the sub-index to decline this week.

Marking the start of a new chapter in Philippine history is the inauguration of the Aquino administration. With both business and consumer confidence rising with this new leadership, forecasts of growth and other economic performance data turned positive. International organizations have also upwardly revised their projections and Philippine economists raised the GDP growth forecast to 5% to 6%. With benign inflation and a low interest rate environment, we can expect that the local economy is geared for recovery. Manufacturing and exports will be the leading drivers for the country.

Geared Up

As mentioned earlier, both the market and the economy are ripe for growth. Although the pacing is slow, we can find confidence that we are set to perform better this year. Along with this new leadership are also new investments. These funds and other projects will be channeled to areas that will drive the economy to move forward. As for other factors, the negative sentiments in the US may find its way in our market. Early estimate of the US jobs data for the past month was quite disappointing. It paints a dismal figure for the official jobs data that will be released tonight. Despite external drags, the Philippines can weather such foreign forces and still perform better.

After punching through its prolonged sideways trend, which likewise formed a triple top, the index is now on an ascending triangle formation with a resistance at 3,375. Its decline for the past days coincides to its 3,330 support before coming back up to test its resistance. However this Friday, the index fell 10 points below its support to 3,290. In case it falls lower, its next target will be on its moving average at 3,265. So far, the direction the PSEi will take could be on the short term downward trend. The RSI and the index's stochastics have both come into a turn. Despite the local optimism, the possibility of a sell off seems to be stemming from external factors.

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