Profit-taking could lead to a stock market drop at the start of the trading week, analysts said, with succeeding days contingent on fresh economic data from China and the direction of global oil prices.
Alexander Adrian Tiu, equity analyst at AB Capital Securities, Inc., said investors were expected to be in “selling mode” as share prices ultimately ended higher following a roller-coaster week.
“For the first trading days of the week, we foresee that profit-takers would dominate the market as share prices were up by more than 7 percent week-on week,” Tiu said.
He said the market’s improvement was attributable to various factors, among which are higher oil prices, which recovered from below $30 a barrel to $33-34, and fourth quarter improvement in the Philippines’ gross domestic product.
Last Friday, the benchmark Philippine Stock Exchange Index (PSEi) picked up by 1.89 percent or 124.24 points to close at 6,687.62, while the wider All Shares added 1.64 percent or 61.52 points to finish at 3, 812.87.
In a week where oil prices dictated the market direction, support was provided by a surprise Bank of Japan stimulus and fourth-quarter Philippine GDP growth of 6.3%.
Jason Escartin, investment analyst at 2TradeAsia, said: “This week’s focus will be on China’s economy as well as oil prices as prospects this week will be data-dependent, which could add more gyration on funds flow movement.
“China’s manufacturing PMI (Purchasing Managers Index) from the National Bureau of Statistics, coupled with a private estimate by Caixin might indicate a shrinking manufacturing sector, a possible catalyst for retracement,” Escartin said.
Confirmation of reports that Russia was looking to meet with Saudi Arabia on a possible output cut could further support oil prices, he said.
“For now, institutional investors are on the lookout for significant catalysts to reverse the general weak trend, especially with elections coming in this year. Caution should be exercised on intra-week spikes ahead of China’s Lunar New Year holiday,” Escartin said.