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Cautious trading seen


05:30 AM May 16th, 2011

May 16th, 2011 05:30 AM

MANILA, Philippines—Local stocks may trade with more caution this week as the weak global markets may temper risk-taking among investors.

The main-share Philippine Stock Exchange index gained 1.7 percent last week to 4,292.11, but sentiment had turned more cautious toward the end of the week.

The volatility in the global equity markets capped the market’s gains as local investors feared that further volatility in the global markets might worsen, according to Banco de Oro Unibank chief strategist Jonathan Ravelas.

“Chartwise, the market’s inability to break above the 4,350 levels suggests a retest of the 4,150-4,170 levels. If bargain-hunting activities emerge at these levels, a return move toward the 4,350 levels may be in the cards,” he said.

But if the market fails to contain itself within the 4,150-4,170, Ravelas said there could be further losses toward the 3,970-4,000 levels.

“While first-quarter earnings have not yet fully been released, we can see so far that a few companies’ earnings will not fully match or outperform last year’s,” said AB Capital Securities analyst Maria Arlysa Narciso.

The market has been consolidating within a range of 4,250 to 4,340 lately, she said.

“The coming week may still be led by corporate earnings and news with a slight influence of developments abroad. Prices of major commodities have been on the rise, causing worries across markets. If this persists, investors’ sentiments may turn sour,” she said.

She noted that the PSEi would likely remain in consolidation as seen in a divergence in two of its indicators. Its relative strength index (RSI) has turned bearish while its stochastic showed a sign of an advance. “It would be best to take advantage of the opportunity when the market starts to dip toward its support,” she said.

On Friday, the closely watched Dow Jones industrial index tumbled 100.17 points, or 0.79 percent, to 12,595.75 on lingering jitters over the European fiscal crisis.—Doris C. Dumlao

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