Philippine shares are expected to consolidate this week following gains that drove the benchmark index above 7,000 points last week.
Although positive sentiment still lingers, investors are likely to cash in on recent gains driven by solid corporate earnings, although profit-taking may be tempered by some follow-through buying related to the rebalancing of the MSCI Philippines Index.
Ricardo Puig, analyst at Wealth Securities Inc., told reporters on Saturday that the market will enter a consolidation phase as investors cash in profits from stocks that reported good first-half earnings and reduce their holdings in stocks that performed below expectations.
“In the next few days, you will see profit-taking on the companies which did well, and continued weakness on those that performed below expectations. For now and the near term, there will be selective buying of stocks,” Puig said.
In the coming weeks, Puig said foreign fund managers will likely realign their portfolios after coming back from their summer vacations and this realignment would influence the market’s trend.
BPI Asset Management echoed this view, projecting that the market will “trade between 6,950 and 7,100 next week with a downward bias” due to profit taking.
“We expect investors to book profits next week, pulling the composite index down. Moreover, disappointment in earnings by some companies particularly in the consumer sector may bring about negative sentiment in the market,” BPI said in its weekly outlook.
On the other hand, AB Capital Securities Inc’s Joyce Anne Ramos said fund managers may adjust their portfolios in line with the MSCI rebalancing which takes effect on September 1.
She expects a “follow-through upside movement” of the market but this will be tempered by investor caution toward companies that performed below expectations and by new updates from overseas.
“As the former resistance at the 7,000 level has recently been turned into a support, we become a little more optimistic for the direction of the market back to 6,875. Given this, investors are advised to prudently take profits and cautiously accumulate at bargain prices,” Ramos said.
On Friday, the PSEi held firm at the 7,000-mark although it fell back 52.49 points or 0.74 percent to close at 7,008.51, while the wider All Shares lost 32.48 points or 0.77 percent to 4,168.32.