Cautious trading seen to continue until polls
The stock market is seen to continue trading with caution this week as the first-quarter local corporate earnings reporting session unfolds while 8,000 has appeared to be a tough barrier for the main stock price index now.
Last week, the Philippine Stock Exchange index (PSEi) gained 99.7 points or 1.3 percent to close on Friday at 7,967.98, supported by modest foreign buying. A fresh rating upgrade by S&P, which brings the Philippine sovereign two notches above minimum investment grade rating, also brought good tidings to the market.
With the government planning to speed up state spending growth in the months ahead after a contraction in the first quarter due to the delay in budget legislation, BDO Unibank chief strategist Jonathan Ravelas said this could boost spending in the second half of the year.
“The week’s close at 7,967.98 signals building momentum at play,” Ravelas said.
“Look for a sustained rally above the 8,000 and a decisive break above the 8,200 to signal breakout from the 7,700 to 8,000 consolidation levels. A sustained break above these levels could see the 8,400 to 8,500 levels,” he said.
Last week, the main index retested the 8,000 mark but failed to sustain its rise above this mark.
“There is some concern about the triple-top pattern on the daily chart as the main index has tried and failed to break above 8,000 for the third time in the last two months. However, there is still hope if it does not break below 7,800,” Eagle Equities Inc. head of research Christopher Mangun said in his weekly research note.
“The market may continue within this range for a few more weeks but I am still inclined to believe that this market is going to go higher. Economic fundamentals are just incredibly good right now and even corporate earnings are expected to perform better than what we saw in 2018,” he said.
A continuous sideways action is a prelude to a big move and the next big move is going to be on the upside, Mangun said.
“In the meantime, retail investors will continue to scalp the market and trade the second and third-liners. It may be a good idea though to start looking at blue chips that may show promising returns in the following months,” he said.
Meanwhile, Mangun noted that first-quarter earnings have started to come in with some companies reporting profits above expectations such as Universal Robina Corp.
The fact that foreign funds continue to come in is a good sign, Mangun said.
