PH market rally seen on earnings reports

MANILA, Philippines–Investors are seen taking their cue from the stream of third-quarter corporate earnings reporting this week to sustain a recent bullish breakout.

Last week, the main-share Philippine Stock Exchange index (PSEi) ended flat at 7,205.72 from the previous week as a near-term bullish bias was curbed by lower-than-expected third-quarter earnings result reported by index heavyweight PLDT.

Local stockbrokerage AB Capital Securities said local earnings results would remain the main driver of share performance similar to the previous weeks.

“On a technical basis, the PSEi continues to be in a near-term bull trend, which started on Oct. 14. As such, any confirmed breach below the support levels at 7,200 and 7,160 will open the index to further downsides at 7,000 point level. Given this, investors may use the support levels as accumulation points while exit points can be found in resistance levels at 7,235 and 7,330,” AB Capital Securities said.

“We now raise a position as last week’s bullish conditions on support were met. Key signal to watch out for this week is the breach above 7,250 which would trigger further advances to 7,360,” said Luis Gerardo Limlingan, managing director at Regina Capital Development Corp., noting an expected spike in the market’s average directional index.

“On the other hand, keeping close watch on 7,160 support is advised—this is an essential support base that the index needs to hold above to sustain short- to medium-term uptrend,” he said.

Jonathan Ravelas, chief strategist at Banco de Oro Unibank, said the index would likely continue to range between the 7,000 and 7,300 levels in the week ahead.

For AB Capital, the sectors to watch this week were gaming and oil-dependent companies. For gaming, it said investors would need to wait for the earnings of Travellers (RWM) in order to get an overall picture of the country’s casino industry.

“Despite BLOOM (Bloomberry) recording record revenues, fears are mounting that the casino industry is not growing faster than expected to support three players (Travellers, Bloomberry and Premium Leisure Corp.),” it said.

Meanwhile, AB Capital Securities said oil-dependent companies such as Phoenix Petroleum and Petron Corp. were expected to post lower margins as they write off inventories from declining crude prices.

On the latest MSCI rebalancing, there was some disappointment after earlier speculation that Bloomberry might be included in the global standard index. On the other hand, Security Bank, which gained 2 percent on Friday, was added to the MSCI small cap index.