Local stocks are seen striving to stay above the 7,000 this week as investors have priced in a hike in US interest rates during the US Federal Reserve meeting this week.
Last week, the main-share Philippine Stock Exchange index rose by 2.27 percent to 7,043.16, tracking record high trading in Wall Street.
Jonathan Ravelas, chief strategist at BDO Unibank, said that last week’s closing was viewed as a mere technical rebound, adding that the local market was still biased toward a test of the 6,500 levels.
“Only a break above the 7,500 levels will call the bulls back to play,” Ravelas said. “Continue to see the market to range between 6,800–7,000 levels in the week ahead.”
Local stock brokerage AB Capital Securities said the index had seen two days of net foreign buying, a factor that could signal short-term bullish reversal.
Since the start of the year, however, net foreign outflows have reached P25 billion. Last week, foreign investors were still net sellers to the tune of P1.12 billion. However, local investors have supported the market’s rebound to the 7,000 level.
AB Capital said the index might trade within the 6,800 to 7,000 range ahead of the Dec. 14 Federal Open Market Committee meeting, during which interest rate was widely expected to be raised.
The brokerage house said local investors remained bullish across the board, lifting second-liners and speculative issues last week while foreign investors remained risk-averse.
For the full week, AB Capital expects the PSEi to hold above the 7,000 level, while trading within the 6,900-7,200 range.
Luis Gerardo Limlingan, managing director at Regina Capital Development, said the first two trading days of the week would be crucial for the PSEi, adding that the 7,100 resistance would likely be tested.
“How the index reacts at resistance will give us an indication as to where prices will move until yearend. A successful breach will sponsor advances towards 50-day moving average (7,246), with a maximum upside of 7,300. On the other hand, failure to break out will induce another round of corrections to 20-day moving average (6,900),” Limlingan said.
“But take note that since overall technicals of the index remain below trigger points, a slight bearish bias is given on this week’s trend. A consolidation between 6,900-7,100 should provide stability since a fresh support base will be established. With all factors considered, we maintain our cautious outlook by selling into rallies, especially for issues that are still technically bearish,” he said. —DORIS DUMLAO-ABADILLA