MANILA, Philippines – Episodes of profit taking are expected to mark this trading week, a development that will allow the benchmark index to create a stronger base prior to testing the 6,500 level.
Investors are advised to selectively accumulate stocks particularly during profit-taking driven pullbacks, analysts said.
“We expect the local equities market to trade within range this week, but with a downward bias as investors try to book profits made from the recent rally,” BPI Asset Management said in a market report. It pegged the trading range at 6,350 to 6,550.
“Given its sudden surge in the 6,400 level, we expect a minor pullback as the stocks are already at overbought levels,” Abbygayle M. Estrella, an analyst at AB Capital Securities Inc.
For Grace Cerdenia, an analyst at brokerage firm 2Trade-Asia.com, the main index is poised to traverse the 6,500 mark, albeit on a more modest tone.
Astro del Castillo, managing director of First Grade Finance Inc., said a healthy correction is in the offing following the strong performance of the stock market last week.
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Week-on-week, the Philippine Stock Exchange index rallied 1.85 percent or 116.63 points to 6,424.99, marking its third straight weekly gain.
It is also the highest closing of the main index since ending at 6,436.49 on Nov. 7, 2013.
Investors cheered strong local corporate earnings and the US Federal Reserve chair Janet Yellen’s assurance of gradual tapering.
BPI Asset Management said foreign investors are beginning to turn positive in terms of sentiment towards select emerging market assets, allowing the local bourse to post its first monthly net foreign buying in six months.
While profit taking will temper gains, it will provide an opportunity for investors to enter the market at lower costs, analysts said.
“Position on dips and seize on rallies to pocket gains,” Cerdenia said, adding that immediate support is at 6,400 and resistance is at 6,450 to 6,460.
“We advise investors to buy on pullbacks which should provide higher upsides,” Estrella said. Entering during the retreat will allow investors to benefit from the rally towards the 6,500 level, she said.
Corporate earnings and external developments will continue to dictate trading this week.
Estrella said the local earnings season is not yet over and potential upside will come from earnings surprises.
“Most will continue to check for leads at the corporate front, specifically on earnings indication for 2014,” Cerdenia said.
