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MANILA - Philippine share prices this week will seek guidance from the results of a crucial Greece election that may determine the fate of the troubled euro zone, according to analysts.
Global markets will cheer a victory of the pro-bailout party that may fuel hopes its new leaders will uphold austerity measures, but things may turn ugly for Philippine stocks - which are amid a medium-term consolidation - if the radical leftist group Syriza wins.
An anti-bailout win "is seen to raise the probability of a near-term worst case scenario that Greece will default and exit the Euro," said AB Capital Securities Inc.
At 15 times forward earnings, the Philippine Stock Exchange index is not cheap and there can be little bargain hunting to provide cushion for the market if the election outcome turns unfavorable, AB Capital added.
The composite index’s immediate technical support level is at 4,850, while the major support is seen at 4,750, the 50-percent Fibonacci retracement level.
While a win by the pro-austerity group may provide a "temporary relief" for the market, it will offer no quick fix to the debt crisis in the Euro zone, which has been a drag to the financial markets in the last couple of years.
"The second scenario could provide a short lived relief rally, which will be followed by a period of consolidation," said AB Capital.
"Despite the strong domestic fundamentals that the Philippines boast of, the local market may not be spared by the contagion effects of a Greek fallout," it added.
On Friday, the Dow Jones industrial average rose 115 points to close at a one-month high of 12,767on expectations that major central banks will step in to ease the damage from a debt crisis in Europe.
"With the latest weekly unemployment claims data, eyes are watchful on the US Fed’s next stimuli support to keep the economy on its gradual recovery phase," said Freya Natvidad, investment analyst at 2TradeAsia.com.
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