Philippine Market Outlook July 23, 2019

MARKET OUTLOOK

Shares dropped on Monday as investors stayed on the sidelines ahead of the president’s State of the Nation Address (SONA).

The market remained flat as market players were on wait-and-see mode for President Rodrigo Duterte’s SONA, noting that the market lacked fresh leads to buoy trading. Investors were also waiting on more reports of corporate earnings.

President Rodrigo R. Duterte delivered his fourth SONA on Monday, where he reported the accomplishments during his first three years in office.

This may be an accumulation phase for the PSEi as investors resort to profit taking following two straight weeks of gains.

From a technical standpoint, the PSEi looks extremely attractive and with the recovery seen yesterday after a massive sell off in early trading, investors are starting to take this rally seriously.

Trading in blue chips continues to pick up and this may be the trend in the market for the next few weeks.

Meanwhile, the European Central Bank meets on Thursday and money markets are pricing in a more than 50% chance of a 10 basis point cut in interest rates. Federal Reserve officials are set to meet a few days later, when they are widely expected to lower rates by at least 25 basis points.

Hopes of an interest rate cut have helped the index rally this month, recovering from a slump in May caused by a sudden escalation of U.S.-China trade tensions.

Federal Reserve officials went into quiet mode a week ahead of the big July 30-31 FOMC meeting when the Fed is expected to cut its key federal funds rate.

The local bourse may take its cues from Wall Street. There could be some volatility if reports on existing-home sales and new-home sales fail to meet Wall Street expectations. The former report is due Tuesday. The Commerce Department reports on new-home sales on Wednesday. In addition, Friday brings the first big read of Q2 growth before the bell.