‘Confusing’ policies cause market volatility

Confusion on foreign and trade policies affects the local equities market and the peso, according to the latest issue of The Market Call.

The Market Call has indicated the local equities market and the peso are likely to remain volatile in the face of uncertainties coming from local and global fronts.

This as US Assistant Secretary of State Daniel Russel earlier said Duterte’s anti-US rhetoric has “created consternation” not only to the United States but also in a number of countries.

Russel cautioned the Philippines against choosing between the US and China after Duterte announced he was cutting military and economic ties with his long-time ally.

The Market Call said that “on the local front, mixed political signals (causing some confusion on foreign and trade policies), together with regulatory changes and sweeping tax reforms, while welcome, are uncertainties that investors will have to navigate going into 2017.”

In September, the PSEi traded the range of 7,493 to 7,781 while the benchmark closed at 7,629.7 or down 2.1 percent. Foreigners were net sellers by P16.8 billion “due to anxieties associated with the Fed rate hike and local political noises.”

“The Philippine peso has weakened significantly. We can attribute the weakness to the following: the Fed’s expected rate hike, Brexit woes, slowing remittances, and political clatter.”

“Moving forward towards year-end, we expect more volatility ahead as we expect a Fed rate hike in December, US presidential elections, weaker peso, and remnants of the 2007 to 2008 global financial crisis resurfacing (e.g., Deutsche Bank’s ongoing woes),” according to The Market Call.

The Market Call furthered that “Investors, who have already priced in the country’s strong economic growth, are looking for better catalysts.” “With external risks weighing down on investors’ sentiment, the market could remain on heightened volatility toward year-end.”