Stocks seen to consolidate this week

Local stocks are seen continuing to consolidate this week in the absence of fresh incentives to load up equities and test the next barrier.

Last week, the Philippine Stock Exchange (PSEi) slipped by 0.67 percent to close at 7,578.16 on Friday.

BDO Unibank chief strategist Jonathan Ravelas said market participants remained on the sidelines as they awaited the stream of first-quarter corporate earnings reports.

“Chartwise, the week’s close at 7,578.16 suggests the market to consolidate in the 7,500–7,600 levels in the near-term,” he said.

BPI Securities president Michaelangelo Oyson said that the market had been trading in a tight range due to lack of fresh news to push consensus earnings per share (EPS) higher.

“The market has also been capped by concerns on the passage of tax reform, perception of lack of clear economic policy direction brought about by Cabinet in-fighting, inflation risk arising from the halting of rice importation and limited valuation upside following the year-to-date performance,” Oyson said.

“While investors are giving the Duterte administration the benefit of the doubt that it will be able to carry out the promised reforms and implement the major infrastructure projects to lift the underlying sustainable GDP (gross domestic product) growth level of the Philippines, they also have limited patience and may de-rate the market without advance notice,” he said.

De-rating refers to a downgrade in earnings expectations, which, in turn, will make stock prices more expensive relative to their earnings potential.

On the Association of Southeast Asian Nation (Asean) meetings to be hosted by the Philippines this week, Oyson said unless there was anything related to US Federal Reserve rates, monetary easing or major infrastructure projects, the meetings might be a non-event for the market.