PH SHARES WEEKLY OUTLOOK

SHARES OUTLOOK: Pullback ahead of Monetary Board meeting

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SHARE prices are expected to pull back this week on profit-taking following last week’s successive gains, which saw the benchmark index hit its eighth high for the year on Friday, with investors likely to take a wait-and-see stance ahead of the central bank’s Monetary Board meeting on Thursday.

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“We expect the local equities market to pull back next week due to profit-taking as well as the expectation of a 25-basis-point SDA [special deposit account]rate hike during the BSP [Bangko Sentral ng Pilipinas] Monetary Board meeting on September 11. We expect the index to trade within a range of 7,165 to 7,224, with a slight downward bias,” the Bank of the Philippine Islands said in a weekly market report late last week.

Jason Escartin of F. Yap Securities Inc. and Alexander Tiu of AB Capital Securities Inc. both said in a weekly market outlook that while the market is forecast to go into consolidation this week, the main benchmark index will trade within the “resistance-turned support level of 7,200” and beyond the all-time high at 7,400 points.

“Investors are advised to keep watch for any breach below the resistance-turned support level of 7,200. With the three-month uptrend remaining intact, we expect the index to test the previous resistance at 7,400, with a possibility of a retracement as the index move towards overbought levels,” Tiu said.

Escartin said that the continued buying activity in the past few days was due to the perceived brighter prospects for the economic activities in the second half of the year and beyond.

“Fund managers are seemingly willing to extend their sight for 2015 prospects, following large-caps’ trail to expand topline scope and/or manage efficiencies that will help improve operating cash flows. Also, majority of local fund managers are starting to allocate higher share for equities, with no immediate significant spikes in sight for changes in fixed income yield,” Escartin said.

“This is also rooted on regional efforts’ move to boost consumption growth, while opening avenues for increased tie-ups and investment spending,” he added.

In the event of a rate hike following the Monetary Board meeting on Thursday, Tiu said that the bright prospects for firms’ second half and 2015 earnings might be tempered as “the cost of borrowings of businesses increases, lowering future net earnings.”

Last Friday, the Philippine Stock Exchange index (PSEi) rose 59.47 points or 0.83 percent to finish the week at 7,263.58, just off an intraday high of 7,264.87. It also topped the previous closing high for the year of 7,206.02, hit on Wednesday. The wider All Shares index likewise added 33.47 points or 0.79 percent to close at 4,290.36.

Friday’s trading session ended in the green as the Philippines’ August inflation rate came in at a better-than-expected 4.9 percent, unchanged from July although more than double the 2.1 percent rate recorded in August 2013.

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