Profit-taking seen to mark this week’s trading

After a strong run-up that retested the 7,000 levels last week, investors are seen to reassess recent gains and lighten up their equities holdings this week.

Last week, the main-share Philippine Stock Exchange index (PSEi) added 4 percent to close at 6,969.88 on Friday. Positive news on the vaccine being developed by American pharmaceutical giant Pfizer brought back the index to levels last seen before the lockdowns imposed by the government to curb the COVID-19 pandemic.

AP Securities head analyst Rachelle Cruz said that after reaching a peak of 7,079 due to vaccine hopes, the PSEi had pulled back due to a confluence of factors: the impact of Typhoon “Ulysses”; rising COVID-19 cases in the United States and European Union, with lockdowns making recovery harder to predict without the presence of a working vaccine and short-term overhang from the semiannual MSCI rebalancing with net outflows for the Philippines.

“As vaccine news start to lose steam, we expect profit-taking activities to take place this week,” Cruz said, adding that potential retracement levels for the PSEi would be at the 6,917-6,793, while the key resistance level was seen at the gaps of 7,102 to 7,180.

“Looking at the third quarter 2020 earnings of index stocks, majority have seen sequential improvement in earnings in line with less strict quarantine measures. More vaccine news, expectations of massive stimulus in the United States, and increased earnings visibility for next year will also help buoy the market in the next months. Thus, corrections would be an opportunity for investors to buy at lower levels,” she said.

Meanwhile, the victory of Joe Biden may push the MSCI Emerging Markets Index closer to prepandemic levels, especially benefiting the renewable energy sector, said BPI Securities president Haj Narvaez.

“A Biden presidency would be marked by reinvestment in domestic manufacturing and technology, a less adversarial stance with China, and a strong focus on environmentally friendly solutions,” Narvaez said last week.

—DORIS DUMLAO-ABADILLA