Further consolidation in PH market seen

The local stock market is seen continuing to consolidate this week as investors weigh external developments, particularly those concerning the US economy.

Last week, the main-share Philippine Stock Exchange index faltered by 3.4 percent to close at 7,021.95. Since the start of the year, however, the index is still ahead by about 20 percent from the end-2012 level.

“Chart-wise, continue to expect weakness toward the 6,850 levels in the near term. If these levels hold, expect a rebound back toward the 7,100-7,200 levels. However, failure for the market to stay above the 6,850 levels could call for further losses toward the 6,500 levels,” said Jonathan Ravelas, chief strategist at Banco de Oro Unibank.

The recent pullback, Ravelas said, was due to hints that the US Federal Reserve’s regime of easy monetary policy might be ending.

However, Joseph Roxas, president of Eagle Equities Inc., said that the bias might be on the upside this week following the recent correction and as economic data in the US remained weak.

He said the 7,000 level might hold but noted that a strong support would be at around 6,600 level—representing a 10-percent pullback from the peak levels at 7,400.

Freya Natividad, an analyst at 2TradeAsia.com, said it was too early to confirm a reversal of appetite for equities unless central banks worldwide confirmed a halt in their monetary stimulus plan. “Yields on fixed income instruments remain unattractive at this point, although volatility is becoming evident at the (foreign exchange) market especially with the latest weakness of the yen against the greenback,” she said.

Natividad said that hopefully, the latest sell-off in regional equities would be temporary, especially once fresh funds or new players would start to come in. She said consistency in net foreign selling indicators would be given weight in investors’ overall gauge while taking into account the likelihood of major changes in monetary and fiscal efforts.

“The market might go through a consolidation mode for now until fund managers get to their senses on fundamental growth support that will help justify prevailing market valuations,” Natividad said.

“Players will take their cue abroad for now until good catalysts emerge to renew interest in local equities trading. Stay alert for a possible surge in buying as soon as supply-side pressure subsides,” she said.

Natividad said immediate support was at 7,000 and secondary support at 6,900. Resistance is seen at 7,070-7,130.—Doris C. Dumlao