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This day is going to be exciting (could be good or bad) as China markets will re-open after being closed since the end of September for holidays. So far, global sentiment has been good and China’s markets are seen to start on a good note. Hopefully, it won’t be the other way around (China dragging the global sentiment down). US markets are up as bio-technology stocks rebounded.

On a not so optimistic side, Bocom’s Hao Hong, the man who called China’s boom and bust, advised investors to take advantage of the rallies in selling as China has more reasons to drop than to rise. For one, he noted that the Shanghai Composite Index has to fall -18% more to around 2,500 to value it as cheap or reasonable. Shanghai Composite’s P/E is currently at 15.3 and its three year average is only at 13. According to Hao, the targeted stimulus isn’t enough to revive the slumping Chinese economy.

Locally, the inflation rate for the month of September was at its low at 0.4% according to the Bangko Sentral ng Pilipinas (BSP). The new lows keep on coming after it was pegged at 0.8% in July and 0.6% in August. Though it has its pros and cons, it’s generally beneficial for the Philippines. One main reason for the drop in the inflation rate is the low oil price environment.

The likelihood of the PSE index dropping (at least a correction for now) is high after it has rallied from roughly 6,700 (low) to 7,100 in less than two weeks. It will probably follow the strong global sentiment. Resistance level is between 7,150 to around 7,250.

PSEI (10-8-15)

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