Volatile trading seen

MANILA, Philippines–Volatile stock trading is seen this week as investors await the affirmation of a breakout after a 10-day winning streak that brought the main index to new highs last week.

On Friday, the Philippine Stock Exchange index closed at a new record high of 7,402.72 and also marked a new intraday peak of 7,446.66.

“The Philippines is seen to benefit significantly from the drop in crude oil prices in the world market. This eases pressure on inflation and provides the BSP (Bangko Sentral ng Pilipinas) with enough room to keep its monetary policies unchanged,” said Banco de Oro Unibank chief strategist Jo nathan Ravelas.

Last Friday’s close indicated that a possible breakout was underway, Ravelas said, noting that a close above 7,450 could put the 7,800-8,000 levels to test.

“We still expect a volatile week for the index as it confirms its new support base,” said Luis Gerardo Limlingan, managing director at Regina Capital Development Corp. “Trend bias for this week is mostly neutral with slight bullish bias due to improved readings from our indicators. Intra-day breaks below 7,400 are fine as long as it does not close below it, or else we could see corrections back to 7,360. Recommended strategy is to wait until prices stabilize above 7,400 before entering positions.”

Local stockbrokerage AB Capital Securities said the local bourse had managed to set a new close above the critical resistance of 7,400 days after the US Federal Reserve maintained its “dovish” stance on rates due to slowing inflation. Falling oil prices are likewise seen to benefit the Philippines, a net oil-importing country.

Domestic headline inflation data release last week, indicating a better-than-expected level at 4.1 percent for 2014, also helped push the rally, AB Capital said.

“The strong take-up of the newly issued 25-year US dollar-denominated bonds for cash, with a 3.95-percent coupon rate similarly helped moved the markets upwards as investors saw this as an indication of heightened confidence of foreign investors in the country,” the brokerage said.

Another positive mover cited by AB Capital last week was the news about the Philippines being the highest exports performer for the third time among East and Southeast Asian economies in November 2014. This was attributed to the growth in manufacturing, agri-based and mineral products.

However, AB Capital noted that the PSEi failed to make a convincing breakout on Friday, with investors taking profit in the afternoon session to push the index down and close near 7,400. This week was thus seen as critical as any failure to sustain the bullish momentum might open the index to a downside of up to the 7,250 points level, the brokerage said.

Meanwhile, it noted that a continuation of the bull run could push the index up to 7,700-7,800 level.

On Friday, the Dow Jones industrial average pulled back by 170.5 points to close at 17,737.37.–Doris C. Dumlao