Cautious trading seen

Local stocks are seen to turn more cautious this week ahead of the “ghost month” and as global markets await more signs from the US Federal Reserve on the tapering of monetary stimulus.

Last week, the main-share Philippines Stock Exchange index (PSEi) gained 142.6 points or 2.15 percent to end at 6,763.62.

AB Capital Securities analyst Gregg Adrian Ilag said that this coming week, investors would focus on the monthly release of US non-farm employment data, European Central Bank’s press conference and the Federal Open Market Committee (FOMC) speech by the Federal Reserve chair.

Ilag said the PSEi was trading at 16.95x 2013 earnings per share (EPS) and 15.55x 2014 EPS, a premium to regional median of price to earnings ratios of 14.92x 2013 and 13.06x 2014, respectively.

“Although EPS growth is higher than the peer median for this year, that is already reflected in our premium valuations. Upgrades on consensus earnings projections have been limited, which poses downside risk given the PSEi’s premium valuations,” Ilag said.

On a technical perspective, Ilag said 6,750 would be a key level to watch as it would represent a 61.8-percent retracement of PSEi’s downtrend from 7,400 to 5,700. “If PSEi breaks down from 6,750, it would test corresponding support levels at 6,500 and 6,400,” Ilag said.  Doris C. Dumlao