Local stocks had a good week due mainly to news coming out of influential US Federal Reserve.
The benchmark Philippine Stock Exchange index (PSEi) gained 4.75 percent to end at 6,424.45 despite the profit-taking on Friday.
“Domestic events were marred by political scandals and a war-torn city down south. But investors’ eyes were on external leads more than on local conditions,” stockbrokerage firm AB Capital Securities Inc. said in a research report.
Gains were credited to developments at the Fed, starting with the withdrawal of Treasury Secretary Lawrence Summers as prospective chair of the central bank, leaving vice chair Janet Yellen, whose policies were described as more business friendly, as a likely successor to Fed Chair Ben Bernanke.
This was followed with an announcement that the Fed was not yet reducing the pace of monetary stimulus.
Analysts, nonetheless, remained cautious for now with some forecasting further volatility.
“With economic policies in place and expectations for full-year economic growth set, we see no immediate factors that will influence the market to move exceedingly higher,” AB Capital said. “Volatility should be expected in the coming days as the eyes of investors will remain on what happens to the US in the next weeks or even month.”
AB Capital said the PSEi’s rise last week was likewise “too abrupt” as fundamental indicators like corporate earnings were not as robust due to “top line constraints, industry slowdown and company-specific issues.”
“With the gap formed between 6,345 to 6,500 levels, a pull back is only natural especially with the lack of solid reasons for the jump,” AB Capital said.
BPI Asset Management, in a separate report, also said the market could correct this week as it had gained almost 12 percent so far this month.
“However, given the record-high net foreign buying of P17.14 billion last Friday, it seems that the bias is for the index to go up for the whole week especially if the index breaks out from its 200-day moving average of 6,467.52,” BPI said.
“We see no reason for the index to go down in the near term now that the Fed has postponed its tapering, which has resulted in a risk-on sentiment,” it added. Miguel R. Camus