Stocks forecast to pull back

MANILA, Philippines–Philippine stocks may weaken this week following record gains in recent sessions although better-than-expected corporate results could continue to prop up local stocks.

AB Capital Securities Inc. said in its weekly outlook report that domestic equities have entered a “consolidation phase” with technical indicators showing stocks at “overbought levels.”

“We expect a small pullback [this] week, which can serve as accumulation points for investors. As such, the index’s support can be found at 7,700 and 7,660, while resistance is expected at 7,800,” AB Capital said.

It noted, however, that investors would also be looking toward full-year 2014 and fourth-quarter earnings results.

“We still see earnings and dividends announcements as catalysts for the market’s movements,” AB Capital said.

“Results have been positive so far with Universal Robina, RFM and Globe Telecom showing healthy top- and bottom-line growth compared to 2013 figures,” it added.

More positive earnings results could push the market higher.

Meantime, BDO Unibank said that Friday’s close signaled that the  Philippine Stock Exchange index (PSEi) was ready to test the 7,800 to 8,000.

The benchmark PSEi closed at an all-time high for a second consecutive week at 7,728.18. This was partly propelled by positive earnings and the favorable macroeconomic environment.

“The combination of a low interest rate and low inflationary environment is generally considered bullish for equities as it increases consumer spending and lowers borrowing costs for corporations,” AB Capital said.

Apart from earnings, investors will also be looking toward the MSCI rebalancing on Feb. 11 and the announcement on interest rates by the Banko Sentral ng Pilipinas on Feb. 23.–Miguel R. Camus