Profit-taking seen

MOST local stocks are seen succumbing to profit-taking this week after a six-day run-up triggered by the much-anticipated decision of the US Federal Reserve to defer any interest rate increase.

Last week, the main-share Philippine Stock Exchange index (PSEi) gained 220.53 points or 3.19 percent to close on Friday at 7,131.91 points.

Local stockbrokerage AB Capital Securities noted that despite last week’s rise, net foreign outflows amounted to P1.2 billion last week, excluding the block sale of LaFarge Republic Inc. The outflows, however, were lower than the level seen in the previous week.

“Moving forward, we expect outflows to continue despite the Fed’s decision to defer hiking rates as the US economy continues to strengthen,” AB Capital said.

AB Capital said that other technical indicators were showing mixed signals with the relative strength index (RSI) pointing to further consolidation and that the index was now near “overbought” levels. As such, outlook for this week remained “bearish-neutral,” the brokerage said. Initial support is seen at 7,000 and resistance at 7,200.

Luis Gerardo Limlingan, managing director at Regina Capital Development Corp., said that despite the resistance breach last week, there would likely be corrective pressures this week. He noted that the last three trading days had indicated weak intraday close together with low price momentum.

“We need prices to hold above 7,110 this week in order to keep the bullish setup intact and rally toward 7,272 resistance. Otherwise, it is very likely that the index will suffer from corrections to (as low as) 6,860,” Limlingan said.

Limlingan added that investors would have to be cautious of index volatility and sharper intraday moves. “A cautious position is still raised this week, especially since some issues have already recovered above their long-term moving averages. On the other hand, we recommend taking profits on trading positions or sell those which are now trading near resistance,” he said.

Banco de Oro Unibank chief strategist Jonathan Ravelas said the stock market was expected to trade within a range of 6,900 and 7,300 this week. “A close above 7,300 could call for further upticks to 7,500,” he said.

The US Fed’s decision to keep interest rates unchanged last week indicated growing sensitivity to external developments, particularly on the economic woes of China. But as it has only prolonged the waiting game on the interest rate liftoff, many are expecting further volatility in global markets. Doris Dumlao-Abadilla