Market seen to stay firm

Local stocks are seen continuing to firm up this week on improving investor appetite as the US Federal Reserve’s latest statement allayed fears of a fast-paced monetary tightening.

The Philippine Stock Exchange index surged by 2.78 percent last week to end at 7,345.02 on Friday following the statement of the US Federal Reserve that the pace of hike would be gradual.

“The outlook remains positive given that we have lagged behind the performance of the US market. Foreign flows will continue to dictate market direction. Given positive correlation historically between the US and Philippine markers, there is a good chance that the Philippine market will play catch up,” said Michaelangelo Oyson, president of BPI Securities.

“The Philippine economy remains strong and company earnings are generally decent. Currency markets have also been in a tight range which augur well for equity markets,” he added.

Joseph Roxas, president of Eagle Equities Inc., said the market would likely have an upside bias this week. “It’s nearing a (bullish) breakout,” he said.

Roxas said the market would be supported by expectations that the US Fed might not hike interest rates this June as previously expected.

After the US Fed raised interest rates by 25 basis points as expected last week, Fed Chair Janet Yellen said further tightening of interest rates would be gradual.

At the same time, Roxas said a prospective turnaround in the fortunes of index heavyweight PLDT this year would also help the market.

“Chart-wise, the week’s close at 7,345.02 suggests that the market will remain range bound between the 7,000 and 7,400 levels in the near term,” said BDO Unibank chief strategist Jonathan Ravelas.

“A break above the 7,500 levels could call the bulls back into play,” Ravelas said.

Meanwhile, the peso last week strengthened by 0.36 percent, causing some profit taking on the greenback as traders reassessed the US dollar’s direction, Ravelas said.

Other factors that led the peso to appreciate was the higher than expected January overseas Filipino remittance level, which grew by 8.6 percent year-on-year to $2.169 billion.

“The week’s close at P50.18:$1 highlights a near-term top could be in place at 50.40,” Ravelas said. —DORIS DUMLAO-ABADILLA