The stock market is likely to dip in the early part of the week as investors may take advantage of gains and prompt fund managers to rebalance their respective portfolios. The market’s mid-week performance will depend on whether the Federal Reserve raises its key rates, analysts said.
Victor Felix, equity analyst at AB Capital Securities Inc., said that the expected dip in the local bourse might be attributed to profit-takers, following last week’s strong performance.
“There could be a slight dip to between 7,050 and 6,950 during the early part of the week as we foresee some profit-takers swarming the stock market following last week’s rally,” Felix said.
Last week, the benchmark Philippine Stock Exchange Index (PSEi) advanced by 200 points to 7,098, a 2.89-percent gain week-on-week, led by financials’ gain of 5.17 percent; mining and oil picking up 3.48 percent; and property advancing 3.31 percent.
Average value turnover, however, was down 12.7 percent at P6.72 billion, despite foreigners being net buyers with a daily average of P373 million.
Apart from profit-taking by individual investors, Felix added that the anticipated dip could also be attributed to the “rebalancing of portfolios.”
“Since the PSEi is in the new band, breaching the 7,000 level, portfolio managers would like to take profit. Thus, they may consider changing the ratio of their respective stock interests, by selling some of its shares and acquire or expand its interest in other stocks,” he explained adding that in the near term, the stock market has “gotten out of the bushes.”
Meanwhile, Jason Escartin, investment analyst at 2TradeAsia.com, said that for the week, investors are also looking at the Federal Reserve’s decision as to whether key interest rates will be adjusted upwardly.
“The Fed [Federal reserve] is set to meet mid-week as it mulls another round of interest rate hikes amid rising inflation expectations driven by an improvement in the oil market. Despite mounting calls for hiking ahead of inflation, policymakers remain cautious,” Escartin said.
Therefore, he noted that rate hike this week would be unlikely to take place.
“At Fed [Federal Reserve] Chief Janet Yellen’s testimony before Congress this past February, she highlighted some key risks that could affect the central bank’s inflation outlook, thus signaling the FOMC [Federal Open Market Committee] won’t hike rates in the short term. This conservative stance has not changed, whittling down expectations from three to four hikes to one to two, seen later in the year,” Escartin said in a note.