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Market to rally if bailout hurdles US Senate |
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Written by KRISTINE JANE R. LIU
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Thursday, 02 October 2008 |
A RALLY would likely ensue today after Wall Street rebounded from its largest point decline in history on expectation a revamped bailout plan would hurdle the US Senate.
Jonathan L. Ravelas, chief marketing strategist of Banco de Oro Unibank, Inc., said: "the market will remain sideways... but there might be a knee-jerk reaction [today] after the Dow’s gain."
Global markets yesterday gained after the US Senate leaders came out with a revised plan to rescue distressed financial firms after the US House of Representatives dumped the plan on Tuesday.
The revised package, as reported, would raise the deposits insured by the US Federal Deposit Insurance Corp. to $250,000 from $100,000 in order to prevent bank runs. But the plan’s main provision that would allow the US Treasury to buy financial firms’ soured assets would remain.
The Dow Jones industrial average bounced by 4.68% or 485.21 points to 10,850.66 after crashing by more than 700 points the previous day.
The Standard & Poor’s 500 index also advanced by 5.27% or 58.35 points to 1,164.74 while the Nasdaq composite index jumped by 4.97% or 98.60 points to 2,082.33.
London’s FTSE 100 rose by 1.15% to 4,958.84 points while Frankfurt’s DAX gained 0.43% to 5,856.07 points after trading opened.
Japan’s Nikkei went up yesterday by almost 1% or 108.40 points to 11,368.26 after falling 4.1% on Tuesday.
Trading was closed yesterday because of a holiday. The day before, the market had fallen sharply on news of the bailout’s rejection by US House members but climbed up to closing.
Defying the trend of crashing global markets, the Philippine Stock Exchange index lost only 1.45% or 37.93 points to end at 2,569.65, which analysts attributed to bargain hunting and the $10.52 drop in crude oil prices.
In a statement, Francis Ed. Lim, Philippine Stock Exchange president and chief executive, said the market’s surprise performance last Tuesday showed there were "cooler heads among our investing public."
"It just goes to show that our stock market stands on solid fundamentals, which should pacify investors’ impulsive responses on our local stock mart," Mr. Lim said.
Nevertheless, Astro C. del Castillo of First Grade Holdings, Inc. said if there was anything the market proved in its two-week roller-coaster ride following the collapse of the Lehman Brothers Holdings, Inc. it was that it would be the unwilling recipient of any developments in the United States.
"When the market found out that Lehman was in dire need, you saw it making knee-jerk reactions," he said.
"We were like dominos falling one by one although somehow we managed to recover toward the end."
The market lost 6.93% or 183 points on the first week of the financial turmoil only to snap back the week after as investors snagged up bargain stocks.
Despite the market’s possible gain today, analysts’ outlook for the market remains dim and said the local bourse would continue to track developments in the United States.
"The market will continue to remain volatile. A lot of the indicators, such as the impact of a new bailout or the number of banks around the world that were hit by the crisis, remain unknown," Mr. del Castillo said.
"We are just waiting for the development in the bailout. It all boils down to [US Congress’ decision] on the mother of all medicines to help ease the credit crunch."
http://www.bworldonline.com/BW100208/content.php?id=131
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