Local stocks seen to firm up further this week

The local stock market is seen to firm up this week as there is still so much cash chasing returns in the financial system.

Last week, the main-share Philippine Stock Exchange index (PSEi) gained 1.71 percent to end at 8,310.88 on Friday, tracking the upswing in US and regional markets.

Joseph Roxas, president of Eagle Equities Inc., said there might still be room for the main index to rise this week given that investors were still teeming with so much liquidity especially after the EDC tender offer that put more money into investors’ pockets.

Jonathan Ravelas, chief strategist at BDO Unibank, said investors were taking position ahead of the third-quarter local corporate earnings reporting season.

On Friday, the PSEi set a new all-time intra-day high at 8,406.34 before paring gains. On Oct. 4, the PSEi had a record finish at 8,344.05.

“Chartwise, the week’s close at 8,310.88 highlights that the market needs more volume to sustain the rally and carry it to 8,500 levels,” Ravelas said. “A consolidation could create the necessary base to catapult the market toward the 8,500 levels.”

BDO sees the PSEi’s immediate support and resistance at 8,000 and 8,500 levels, respectively.

But while the PSEi hit new highs last week, the peso depreciated for the second straight week to 51.15 against the dollar. Ravelas said this was due to higher demand for the greenback after a series of positive US economic data.

Chartwise, the week’s close at 51.15 highlighted the market’s inability to sustain the break below the 51:$1 levels, Ravelas said.

“This signals further consolidation within the 51-51.30 levels in the week ahead,” Ravelas said.

“A break below the 51-levels could retest the 50.80 levels. Only a break above the 51.30 would suggest otherwise and test the 51.50-51.60 levels,” he added.