The Deutsche Effect
The PSE might remain weak this week but a few surprises won’t be far off (such as momentum and sentiment swings). Apart from the possibility of raising interest rates anew, which sent markets dropping in the past few weeks, the concerns surrounding Deutsche Bank might enable to continue the market slump. The US government asked Deutsche Bank to pay $14-billion to settle mortgage cases. This caused a drop in stock markets all over the world. Shares of Deutsche Bank dropped by -6.7% last Friday. This caused ripples in the financial sector of Europe whose banking index shed -1.5%. Royal Bank of Scotland lost -4.8% while Credit Suisse lost -4.5%.
As much as we convince ourselves that the Philippine economy and PSE are insulated against such economic and corporate shocks, the chances of the PSE following the general (global) market sentiment is really high given the hot money that flows in and out of the country.
As mentioned last week, the potential bounce points of the PSE index are between 7,400 to 7,600. At this point, the index bounced after approximately hitting the 7,490 level. It still has yet to be seen if the drop last Friday will result in a bounce once the index re-hits 7,490. If not, the last line of defense would possibly be at around 7,400.
We’re in a situation where fundamentals and technicals disagree with each other. Fundamentally, Deutsche Bank was slapped with a huge fine which would obviously rock markets. Technically, we’re at a potential support which, theoretically, would result in a bounce. Everything will boil down to sentiment. Will people buy or sell? Will people take the technical (support) or follow what the fundamental says (Deutsche Bank fined big time) or — will a new development come out to counter the pessimism that clouds the market right now? Just observe how the sentiment will turnout.
Regardless of market outlook, TEL is worth looking at at this point.
TEL has been dropping for more than a month now and is getting closer and closer to its potential support at around P1,620. This may not drop all the way down to P1,620 in just a day or two but keep TEL in your watch list and observe its price once it gets really close or hit P1,620.
Just an important note about my blog entry – The outlook for this blog is only good for the week and shouldn’t be used (as a reference) for long term decision making.
Article by Makoy Velasco, Certified Securities Representative
Any views or opinions represented in this blog are personal and belong solely to the columnist and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.