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Still Mum
by Maria Arlysa E. Narciso
Friday, July 23, 2010

Save for a few stocks which performed spectacularly this week, the index mirrored the uncertain emotions of the market as it awaited further developments. Economic conditions are actually favorable and bring a better outlook for the year. But investors chose to look forward to the upcoming earnings season, the SONA, and the new trading system which will bring about changes in the market. The PSEi ended the week slightly flat, with a drop of -0.77%. Even if it had a direction of its own, outcomes in foreign markets also had an effect, although minimal, to the index. The PSEi closed the week at 3,416.10 led by the usual index movers like ALI and TEL. Some activity was felt in the small caps as well.

According to the local exchange, collective earnings of listed main index firms during the first quarter was positive. The gains of the companies were mainly due to the improved economic condition and offshore operations. However, sale of assets was also a leading factor which led to this increase. Although revenues were positive for the firms, the reason for such increase must be factored in – improved sales or cutting on costs. This coming earnings period, investors must closely scrutinize the quality of earnings. Meralco will be the first to report, Monday (July 26, 2010) next week.

In foreign developments, the Dow is continually moving in a cautious manner and with a lack of a firm direction. Earnings are so far mixed and with no clear and significant trend among those who have already reported. Outlook per stock is changing while economic condition in the country play a significant role in their performance. Locally, several stocks have stolen the limelight during the week. Among them is PNB which was actively traded and rose 26% to P43.50 for the week. This was on speculations that the merger with Allied Bank will finally push through.

Expect Changes

The coming week will bring a lot of new things for the market. With the new trading system to be implemented on Monday, volatility will be lessened. Meanwhile, President Aquino is scheduled to deliver his first SONA on Monday as well. His speech will be about his plans for the country and his response to the economic difficulties he inherited from the previous administration. Although most economic forecasts for the country are positive, President Aquino's words will have a significant weight on the direction we're heading to and the overall sentiment of the people. Another important thing to look into is the second quarter earnings of companies. Results will indicate whether the views of a better economy reflected on company performance. Also, if revenues turned out better, then we can safely say that we can smoothly achieve a strong growth this year. Next week could be another trek downward for the market if expectations are not met. For its technical indicators, we are on track for a correction next week. This is needed since the index had already gone a long way strongly and valuations have turned higher.

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