The Philippine Stock Exchange index (PSEi) is seen possibly breaking into the 7,600-point territory this week, with quick profit-taking bouts puncturing gains that may prevent the benchmark index from standing its ground.
Given the market’s record-breaking runs last week, fueled by optimism about the economy even while global equities sputtered, investors will understandably grab the chance to cash in on the positive economic data released recently.
“Hitting 7,600 this week is possible, given the bullish readings” for the economy, Luis Limlingan, Regina Capital Development Corp. managing director, said.
“We see the index driving more advances this week as our bullish conditions were met, but some intraday pressure should also be expected, since 7,515 is a resistance area,” Limlingan said.
BPI Asset Management, however, predicts any near-term advance may be cut short by profit-taking as should be expected after the benchmark index set new record highs last week.
“Nevertheless, the market should remain supported, given strong volumes. Sentiment toward the local equities market should still be positive, though investors will be continuing to watch economic data from the US, react to upcoming US economic data, especially the CPI figure,” BPI said in a market outlook.
“If the US inflation rate continues to be solid, then the market may price in an early rate hike for the Fed, weighing down investor sentiment,” it added.
On Wednesday, January 14, the last trading day before the Papal visit to the Philippines cut short the trading week, the PSEi hit all-time highs for both the intraday and closing levels.
The PSEi closed at 7,490.88, after touching an intraday record of 7,530.41.
That was the second time the index set all-time highs this year, with the first recorded on January 9 when the index finished at 7,402.72 after hitting 7,446.66in intraday trade.
The market is due to resume trading Monday, January 19.
Raul Ruiz, RCBC Securities Inc. vice president and head of research, said the Philippine financial market currently occupies a bright spot in the world market, especially in contrast to Wall Street’s declines over the past few days that have led to the “retreat of most markets in the region.”
Ruiz sees the significance of such contrasting trends as they show the strength of the domestic market, which has become attractive to investors.
“All indicators were positive — market breadth was positive, volumes surged alongside the gains and it seems foreigners were net buyers. The index heavyweights such as SM, TEL, ALI and SMPH enjoyed (the) buying (interest), an indication that interest was in the market as a whole and not in specific stocks,” Ruiz said.
He also said further buyingis expected today (Monday) on “pent-up demand from the long weekend and also following a successful Papal visit.”
“However, the market should eventually see profit-taking, although buying support should come in toward 7,400,” Ruiz added.
Since Jan 5, the first trading day of the year, the benchmark PSEi has been treading on unchartered territory, interrupted only by profit-taking on January 9.
Analysts are expecting short-term corrections in the days ahead, but remain strongly positive about the impact of first-quarter corporate dividends play and sustained optimism about the economy for the whole year.