Local stocks are seen continuing to pull back this week as many stocks have hit rich valuations while some external factors such as the US’ fiscal woes linger.
Last week, the main-share Philippine Stock Exchange fell by 87 points, or about 1.5 percent, to close at 5,707.11 on Friday.
Freya May Natividad, an analyst at 2TradeAsia, said the deadlock among US legislators on budget discussions depressed sentiment during the week, overshadowing the Federal Reserve’s pledge to buy $45 billion worth of treasury bonds a month and retain interest rates near zero levels until 2015.
“Momentum is likely to slow gradually as a prelude to holiday portfolio closing. Institutional players might be inclined to unwind some of their earlier buy positions to retain enough liquidity ahead of the Christmas and New Year breaks. With no firm compromise pact in place yet on the US fiscal deficit issue, some might be on ‘tentative mode’ unless positive surprises are announced,” Natividad said.
Over the long term, Natividad said funds flow would continue to favor high-growth emerging markets like the Philippines on supportive growth numbers for 2013. But after peaking at 5,866, she said the market might retest maintaining its poise above 5,700.
“Set against a healthy macro backdrop at home, gradually seize intraweek softness to position for 2013. It might be timely to consider unnoticed shares per sector, especially those with promising yields,” she said.
Immediate support was seen at 5,650-5,700 and resistance at 5,800.
AB Capital Securities analyst Abbygayle Estrella said a temporary technical correction had restrained the PSEi. “Aside from the omnipotent shadow that the US fiscal cliff has cast over major markets, we do not foresee any catalyst that could reverse the ongoing correction of the local index.”—Doris C. Dumlao