Cautious trading seen

Stockbrokerage AB Capital Securities Inc. has advised investors to take caution in investing in the stock market and possibly lighten their portfolios for the week due to concerns over “high” valuations and as technical indicators pointed to a near-term dip

The benchmark Philippine Stock Exchange index (PSEi) last week briefly breached the key 7,000 level last week due to better-than-expected inflation results at home and positive sentiments overseas but investors might want to stay on the sidelines in the coming days, AB Capital said.

“High valuations still remain a concern among market participants, share prices succumbed to profit-taking as investors cashed in their recent gains. At 6,901.09, the PSEi is trading at 21.82 times price-to-earnings ratio,” AB Capital said in its weekly outlook report.

AB Capital also noted technical indicators that point to the possibility of the PSEi falling below 6,900. It pegged support levels at 6,800 to 6,900.

“We advise investors to wait for further pullback before positioning,” the stockbrokerage added.

For its part, BDO Unibank said the market would trade between 6,800 and 7,000 in the coming weeks ahead of the release of second-quarter corporate results.

The PSEi lost about 0.88 percent last week to end at 6,901.09 on Friday.

Average value turnover was higher at P8.47 billion from the previous week’s P7.41 billion. Net foreign buying was weaker at P177.85 million versus previous week’s P447.55 million.

Select local news helped provide some measure of support, including an announcing of a credit-rating upgrade from Japan-based R&I.

With few local leads coming up, AB Capital said investors would be on the lookout for news overseas. These include economic updates from US Federal Reserve Chair Janet Yellen’s testimony before the Senate, American manufacturing data and consumer sentiment, and China’s gross domestic product scorecard. Miguel R. Camus