Local stocks may consolidate below 5,300 this week as investors dig for oversold stocks while digesting the impact of the local corporate earnings season and an upcoming US Federal Reserve meeting, dealers said.
Last week, the Philippine Stock Exchange index ended 0.17 percent higher to close at 5,219.55 on Friday.
“I see the market to continue to consolidate this week with a slight upward bias as it unwinds the oversold condition caused by the recent sell-off,” said COL Financial president Conrado Bate. “Note though that we don’t think a strong base has been built in the market for rallies to be sustained,” noting that the PSEi could hover between 5,100 and 5,300.
Based on data of foreign flows into the local stock exchange, foreign investors were in a net selling position in the last three weeks. Some domestic institutional investors, however, were still reallocating some funds from fixed income to equities in a record-low interest rate environment.
Last week, the Bangko Sentral ng Pilipinas even slashed its overnight borrowing rate to a new low of 3.75 percent.
This month could see the stock market retreating to a “passive” mode with the onset of the “ghost month,” said 2TradeAsia.com analyst Freya May Natividad. “This might help explain the PSEi’s short-term declining channel, having fallen from a high of 5,403 to 5,116 in a span of three weeks, plus deceleration in turnover to an average of P4.5 billion (a decline of 20 percent),” Natividad said.
In Chinese tradition, the “ghost” month is the period where ghosts and spirits are believed to linger in the world. During this period, which coincides with the season when many Western traders are on long summer vacations, investors tend to shy away from taking aggressive positions. This 2012, the “ghost month” falls on August 17 to September 15.
Natividad said it would be good for investors to check for good windows as barometers consolidated within the 5,150-5,280 range. Immediate support was seen at 5,170-5,200 and resistance at 5,250-5,300, Natividad said.
She said investors should also check expected valuation parameters for 2013 based on the preliminary earnings tally for the first half, with the release of corporate results in the coming weeks.—Doris C. Dumlao