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MANILA - Philippine share prices will likely take their cue from local corporate earnings reports, as investors await the results of central bank meetings in the US and EU.
The Philippine Stock Exchange index marked its return above the 5,200 on Friday, thanks to the Bangko Sentral ng Pilipinas' decision to cut policy rates.
Anticipation of better first-half profits may allow the main index to hold above that level although its ascent may be held back by concerns over global economic growth.
"The key driver would largely be local earnings since we know that a long-term solution to Europe's woes is quite far from reach as of now. Since the reporting is just about to start, most investors would most likely stay on the sidelines and wait for more earnings of index issues to pour in," said Maria Arlysa Narciso of AB Capital Securities Inc.
Even as the domestic outlook remains optimistic, the second quarter may be a "challenge" for listed companies, Narciso said.
On Friday, index issue Philex Mining Corp. and its unit Philex Petroleum Corp. caused some jitters on the earnings front after reporting a drop in first semester financial results.
"For banks, we expect growth to be sustained although it would not be as impressive as the first quarter. Real estate will still enjoy the prevailing low interest rates as buyers are given easier access to credit and lower borrowing cost. Mining issues could be hit by low prices of precious metals, resulting to lower value of production," said Narciso.
On Friday, the Dow Jones industrial average rallied 1.46 percent to close above the 13,000 level in anticipation of a possible European Central Bank action to buy bonds, which would help bring down borrowing costs and ease the region's debt crisis.
Global markets will closely watch the meeting of the Fed and the ECB this week amid expectations of favorable policy action from the two powerful central banks.
"Markets have already underscored more stimulus measures are required to pump-prime demand. More than extending maturity of fiscal debt and talks for another bond purchase plan, markets will give higher emphasis on approaches to hasten and prioritize employment," said Freya Natividad, investment analyst at 2TradeAsia.com.
Natividad said that there may be some occasions when markets might be on "passive mode" this August, historically known as a "ghost month." This may be explained by the benchmark index's short-term declining channel and the deceleration in turnover to an average of P4.5 billion.
"After two weeks of declines, this may be an opportune time to look for stocks that are oversold or still post significant upside. Be warned, however, that overall sentiment may still remain muted and uncertain, resulting to a sluggish market activity in the coming week," said Narciso.
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