Trading Outlook for July 03, 2009
Wall Street's sharp overnight retreat (DJIA -223, Nasdaq Composite -49 points) could weigh on regional sentiment Friday, following poor employment data. As recently mentioned, market participants will check for the local bourse's staying power above the 2,400 immediate support zone, or test 2,380 secondary support. In case this level is violated, institutional investors might bid for more time to check for the market's stable zone. Trade cautiously. Try considering defensive plays in your overall portfolio mix. Immediate resistance is 2,450.

Weekly Outlook for 29 June - 03 July 2009
Local equities landed higher during the week, as bargain hunters seized the recent weakness to position in their favorite bets. Part of the support came from slowdown in US economic contraction, after 1Q09 GDP shrank 5.5% versus -5.9% estimates. Also, US consumer spending grew 1.4% during the latest weekly tally this June. All told, the PSEi landed 79 points higher at 2,477.44 (+3.3% week-on-week) paced by industrials (+4%), property (+3.41%) & services (+3%). Most also ignored the faster decline in April’s merchandise imports (-37.4% to $3bn versus prior year’s +11.8%). Among select large-caps that rose were: MER (+7.52% at P143/share), even after Metro Pacific Investment deferred its MER acquisition from PLDT Beneficial Trust Fund group; FLI (+7.14% at P0.75); FPH (+5.36% at P29.50), after BPC opted to raise its interest in FPH’s preferred shares; ALI (+4.88% at P8.60) ahead of its upcoming P60mn ‘Homestarter’ bond float; & JFC (+4.3% at P49). Mining shares were also higher led by PX (+4.55% at P6.90), following reports First Pacific would expand its interest in mining via PX; as well as higher gold & crude futures prices, boosting LC (+2.9% at P0.18 for A-, +2.8% at P0.185 for B-shares). SMC (+3.97% at P65.50 for A-, +3.15% at P65.50 for B-shares), after announcing a P0.35/share cash dividend for shareholders as of 21 July 2009. Average daily participation regressed 46% to P2.3bn, although market breadth favored winners, 60-43. Net foreign selling eased from P229mn last week to P71mn.

Volatility ahead
Stimulus effort at the fiscal front.  The US central bank’s plan to maintain an earlier plan to purchase $1.25 trillion worth of mortgage-backed securities, $200bn of Federal Agency debt & $300bn US Treasuries probably indicate the medium-term stimulus drive won’t likely be ‘monetary-intensive’. This should prod part of liquidity to be reverted into global equities, even as players have yet to check on other plans that would help revive economic activity. For now, details on the subject would be focused for upcoming sessions, set against the backdrop of health-related matters that might take its toll on labor productivity.

Ride the peaks & troughs.   The weight between those who believe the timing is ‘appropriately ripe for accumulation’ into equities investing, versus those who think liquidity might still be driven by other alternative markets (e.g., foreign exchange, fixed income), is likely to create volatility in the bourse this coming month. While there are no quick fixes to global economics pending deliberation on next moves in industrialized markets’ financial clean-up, several are also aware of other merits tied to the Asian region’s growth story, beginning with China’s $585bn economic stimulus plan. At home, some are also keen on fiscal spending drives for infrastructure, which is typical of 2010’s election season. Coupled with benign consumer prices & low interest rates, listed firms might start to unravel their earlier stalled capital expenditure (capex) initiative, in the hope of maximizing earnings for the remainder this year.

Appreciating gyrations.  Having breached its recent low of 2,360 last 28 May 2009 since the PSEi hit its high of 2,626 last 16 June 2009, market players are carefully assessing if the bourse is prepared for base-building (at 2,400-2,450) which could support run-ups past the latest resistance level, or waiting for the next worse news that might prompt possible downward movements. The lowest mark that the PSEi took was at 1,745 last 17 March 2009. Given a relatively ‘passive’ month for July-August, trades might seesaw within 2,360 to 2,570, as attention is locked on volume/momentum improvement back to an average of P4bn daily. Trade modest ranges. Position on weakness & lock-in gains on strength