The US Federal Reserve's 25-basis point rate reduction failed to inspire investors at home, especially following stiffer competition from returns provided in alternative markets (e.g., fixed-income, forex, commodities, etc.). The PSEi lost 55 points at 2,722.95 (-1.98% week-on-week), on weakness in holdings (-3.43%), properties (-2.55%) & mining (-2.53%). This week's top losers were: DMC (-10.61% at P5.90); GLO (-7.39% at P1,315); ABS (-7.29% at P22.25); ALI (-4.39% at P9.80); MBT (-4.17% at P34.5), despite its planned P10bn issuance of unsecured subordinated debt; & AC (-4.07% at P295). Meanwhile, SMCB (+6.52% at P49); SECB (+5.17% at P61); LCB (+3.57% at P0.29); and SCC (+3.37% at P46) advanced. Trading activity remained fragile at P2.3bn, as pessimists prevailed, 58-33.

Switch from monetary to fiscal policies.   The week saw regional markets revising economic growth targets to cope with persistent inflation concerns, brought about by shortages in world food supplies & OPEC's move to ignore calls for higher production. Investors saw Japan revising growth forecast to 1.5% for the year ending March versus 2.1%, due to higher consumer prices. Also, India's central bank ordered financial institutions to set aside more funds to relax lending to cap the present 7.33% inflation. At hope, local authorities forecasted inflation in April moving to as high as 7%, as a result of power rate adjustments due to higher crude prices. This was the same predicament in South Korea, where inflation possibly may have already exceeded the central bank's target after consumer prices rallied 3.9%. Moving forward, attention is starting to switch from monetary to fiscal policies, specifically on issues tied to budget allocation to resolve food supply imbalances. Unless investors see convincing measures are in place, apprehension might still be present relative to equities investing.

Self-reliance in a world of cartels.   Largely figuring in forecast revisions is OPEC's call not to raise crude output despite concerns record prices could support a global economic slowdown. OPEC officials believe prices are driven not by fundamentals, but by speculation & this approach seemed to have inspired countries to adopt a similar stance. Of great concern is Thailand's move to form a rice cartel in partnership with Vietnam, Cambodia, Myanmar & Laos. Opposition to the group, named Organization of Rice Exporting Countries (OREC), has been expressed by officials who warn this could worsen global food security problems & advising countries should achieve self-sufficiency as soon as possible.

Preparedness for possible reversals.   So far, equity players remain apprehensive of positioning heavily in regional bourses. Interest has been spread out in favor of better returns via alternative markets. Given the recent weakness however, the market appears to be waiting for good opportunities to recognize positive reversals, but more for seasoned investors who are brave enough to tolerate short-term volatility. Trade cautiously. Immediate support is 2,650-2,680, resistance at 2,750-2,780.