Profit-taking, market correction seen this week

The conclusion of the hotly contested US elections is seen to favor the local stock market, whose main stock index is now trading at levels seen before the government locked down most regions to prevent the spread of the coronavirus pandemic.

After a strong run-up in the last two weeks, however, some profit-taking is expected this week.

Last week, the main-share Philippine Stock Exchange index (PSEi) surged by 5.72 percent to close on Friday at 6,685.69.

“The week’s close at 6,685.69 shows some minor profit-taking after testing 6,700 levels,” BDO chief strategist Jonathan Ravelas said. “Expect the market to range within the 6,300 to 6,700 levels in the near-term.”

On the upside, he said the next resistance level would be at 6,900.

Joseph Roxas, president of Eagle Equities, said the PSEi might see some correction this week toward the 6,500 levels.

Meanwhile, Manulife Philippines said the conclusion of the US elections had removed one big uncertainty on the global economic outlook.

“Given the ongoing pandemic, the elimination of this source of volatility will be welcomed by investors,” Manulife said in a research note.

“Investors who have chosen to stay on the sidelines pending the US elections may finally decide to invest in equity markets including the Philippines.”

Manulife said another round of fiscal stimulus package would support the US economy, which should bode well for markets globally, including the Philippines.

“We believe that the reopening of the local economy and the containment of COVID-19 will have broader implications on the local equity market than the outcome of US elections,” the research note said.

Regardless of the outcome of the US elections, Manulife said interest rates would remain low.

“We don’t expect any major central bank to raise interest rates in the coming five years. This means that the search for yield will continue, pushing investors further to invest in securities like real estate investment trusts (REITs), preferred securities, high-yield debt and even equities,” the research said.

Manulife expects the US-China tension to remain but the impact on China would likely be well-contained.

“China’s commitment to high quality growth and market reform could outweigh the results of US election in the long term. We believe that China’s economic development will be focused more on homegrown innovation and self-sufficiency,” it said. —DORIS DUMLAO-ABADILLA INQ