PH SHARES WEEKLY OUTLOOK

Profit taking to provide ‘technical breather’

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The stock market appears set for a “technical breather,” with profit-taking balancing out gains made last week, analysts said.

“This week, we expect some profit taking as the market has been up for most of the [previous]week. The PSEi should trade between 7,000 and 7,250 with main catalysts being the local export and OFW [overseas Filipino workers]remittances figures, and further developments in the US and China,” BPI Asset Management said.

The bourse topped 7,100 points last week, tracking Wall Street gains arising from news that the US Federal Reserve was unlikely to raise interest rates soon.

Jason Escartin, investment analyst at F. Yap Securities Inc., said: “a technical breather won’t come as a surprise given the previous week’s rally.”


“Data drivers for sentiment might be inclined towards China’s trade data and US inflation … the PSEi could test resistance at 7,150. If this is pierced on strong volume, rises towards 7,200 to 7,300 might be seen, but remember that a retracement is also likely,” he said.

Escartin said investors would be closely watching developments in China as it transitions from being an export-driven economy to more of a consumer-oriented one. US inflation numbers will also be under scrutiny as these will be a factor in any Fed rate hike.

“The story for the US will remain tied to the Fed’s policy tightening. Recall that the Fed is looking for recovery in its labor market and sustained inflation at 2 percent. Should inflation fall below target, equities could surge on the heels of another delay in liftoff,” Escartin said.

“The Fed minutes [released last week]reveal policymakers considered volatility in global equities and a slowdown in the global economy as reasons for the delayed rate hike,” he said.

“With [US] inflation still below target and jobless claims continuing to show a downtrend with 263,000 in the week of October 3 — versus the estimate of 271,000 — equities still have extra room for gains, up until the next hike, which is now seen this December.”

Investors will also keep tab of volatility in the crude market, Escartin said, noting: “Oil’s surge above $50 per barrel may signal a reversal in the mining and oil sector after OPEC [Organization of the Petroleum Exporting Countries] told the IMF [International Monetary Fund] that global demand would rise by 1.5 million barrels per day.”

“However, inventory in the US plus developed countries persists above 5-year averages and there are no clear signs OPEC will cut production. With that, only the US is seen to trim its output, as indicated by the latest decline in rig count.”

RCBC Securities Inc. research analyst Anton G. Alfonso, meanwhile, said investors “ignored several Philippine GDP [gross domestic product]growth forecast downgrades from the likes of the World Bank and IMF” last week, choosing to focus on US market gains.

The domestic market would likely keep doing so but it “could be limited by profit-taking in the lull before third quarter corporate earnings begin rolling out later this month,” Alfonso said.

Luis Limlingan, Regina Capital Development Corp. managing director, forecast a “neutral to slightly bearish” trend due to expected profit taking.

“We need prices to rally past 7,160 to trigger a breakout and retest next resistance areas between 7,210 to 7,272,” Limlingan said.

“On the other hand, failure to break would cause pullbacks to 7,000, possibly extending to 6,820 based on current volatility,” he added.

On Friday, the main PSEi added 32.12 points or 0.45 percent to hit 7,138.91 at the close, while the broader All Shares index also gained 16.35 points or 0.40 percent to 4,079.75.

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