News / Inter Market Analysis


Waiting and Watching
By Fitz Aclan
October 07, 2008


After rejecting the bailout bill early last week, the US Congress quickly turned thing around by passing a slightly different version of the bill which included certain “sweeteners” to pacify earlier concerns by various lawmakers. Investors reacted negatively to the earlier failure with the biggest one-day drop in US history.

Over the weekend, US President Bush signed into law the controversial bill and stated that it was “necessary” to avoid further deterioration in the US financial sector. Although there were some reservations voiced in various sectors, I believe the bill was passed to restore confidence in the market.

We are also seeing a concerted effort among global central banks to inject capital in beleaguered financial institutions. This is a good sign that at least now, there are more efforts to arrest the global deterioration in the financial markets.

Again, the key effort here is to restore confidence especially after we saw several bankruptcies among various financial institutions globally particularly in the US and in Europe. As I mentioned before, it will definitely take a concerted effort among various central banks and governments to boost confidence among investors with the ultimate goal being to prevent the real economy from further sliding.

Most economists are projecting that the US may have already reached a recession as early as 3Q08 and can possibly extend further to 1Q09.

Last week, the jobs data was unchanged with unemployment at 6.1 percent for the month of September. But the non-farm payroll fell 159,000 - the largest monthly drop in more than five years. This data has led economists to predict that the US may cut interest rates further in the next FOMC meeting particularly as unemployment increases.

From a trading standpoint, this week will be crucial for the PSEi as it would be interesting to see how investors would respond to the recent passage of the US US$700 billion bailout plan and whether this bailout plan is enough to restore confidence in an already beleaguered market as more and more stories of distressed companies come out.

The local market looks like it will continue to take its cue from the US and global markets and how investors react to the passage of the US$700 billion bail out plan. Meanwhile the technicals on the Phisix indicate a resistance at 2,700 with support at the 2,400 area.

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