Local stocks are seen struggling to stay above the crucial 8,000 mark this week as investors reassess recent gains.
Last week, the main-share Philippine Stock Exchange index (PSEi) was virtually flat. It rose by a meager 6.08 points or 0.08 percent to end on Friday at 8,053.20.
“The week’s close at 8,053.20 signals the market still has the momentum to try the 8,150 levels, as we touched the 8,116.23 intra-week high,” BDO Unibank chief strategist Jonathan Ravelas said.
“Failure for the market to stay above the 8,000 levels could signal more profit-taking activities back to 7,500 to 7,800 levels,” he added.
Last week, it was reported that the Philippines grew its gross domestic product (GDP) by 6.1 percent year-on-year in the fourth quarter, slower than the median estimate of 6.3 percent. This brought full-year 2018 GDP growth rate to 6.2 percent.
“The report highlights the recovery of consumer spending, which grew to 5.4 percent year-on-year versus third quarter’s 5.2 percent. This help boost consumer stocks,” Ravelas added.
Christopher Mangun, head of research at Eagle Equities Inc., said local equities might continue to trade sideways with a slight negative bias this week as investors take some profits after the incredible run seen in the last three weeks.
Mangun noted that the main index was still up by 7.8 percent for the month and even if it would drop by 1 to 2 percent this week, he said this January would still end as one of the best months for the market in a while.
“However, if we see a pick of trading volumes and foreign inflows, it may just defy gravity and break through resistance at 8,100 and perhaps end the month as one of the best in history,” Mangun said.
He noted that US equities markets had started slowing down after bottoming out a few weeks ago.
“If they continue at this pace, we may see more foreign money flow into our market. Either way, the PSEi chart looks extremely attractive after the golden cross that we saw on the moving averages and if we take cues from this, we may see it continue to gain traction as more and more investors gain confidence and start coming back into this market,” he said.
In technical trading, a golden cross indicates a bull market on the horizon.
Foreign funds continue to flow into the local market.
“Money always looks for the best opportunity and right now it looks like they are coming back into emerging markets like the Philippines after the correction that we saw for the most part of last year,” Mangun said.