Stock trading to open firmly but profit-taking may set in this week
MANILA, Philippines—The stock market may open firmly ahead of President Aquino’s State of the Nation Address but the outlook is mixed for the rest of the week as more equities turn ripe for profit-taking.
The main-share Philippine Stock Exchange index gained 0.44 percent last week to close at 4,478.36. A new peak of 4,515.77 was set on July 20.
While stocks are usually buoyant during the State of the Nation period, the index is seen succumbing to the weight of overbought stocks, according to Eagle Equities president Joseph Roxas. “After the SONA, the market may weaken.”
Banco de Oro Unibank chief strategist Jonathan Raveleas said last week’s close at 4,478.36 suggested corrective downward movement.
“Expect the equity market to take a breather after reaching new highs,” Ravelas said.
AB Capital Securities, however, sees local equities trading higher this week following the fresh bailout for Greece and the latest developments on the European Union’s rescue fund.
“We also see positioning ahead of the vote on the US debt ceiling, which we think will be raised. A failure to do so will leave the US government unable to meet its daily obligations and a potential global financial crisis could follow. We are certain that such a negative scenario is something that nobody wants to see,” AB Capital said.
AB Capital expects some profit-taking early in the week as shown by the sell signals from the PSEi chart. “However, the longer-term chart is bullish as the PSEi seems to have broken out from a bullish inverted head-and-shoulder formation, which has a target of 4,830,” it said.
“We also see positioning ahead of the vote on the US debt ceiling, which we think will be raised. A failure to do so will leave the US government unable to meet its daily obligations and a potential global financial crisis could follow. We are certain that such a negative scenario is something that nobody wants to see,” AB Capital said.
