Lack of fresh news, political uncertainties seen to keep stocks in consolidation mode

The market will continue to move within a limited range this week as the lack of fresh news coupled with the political uncertainties will likely keep investors on the sidelines again, analysts said.

Week-on-week, the Phisix closed lower at 1,647 points from 1,689.91, although a late buying spree last Friday helped put a halt to the steady downtrend.

After four sessions of decline, bargain hunting on select issues helped push the market slightly higher although total turnover was significantly lower at an average of P536 million throughout the week.

"The market is expected to consolidate over the near-term; having broken through intermediate support at 1,650, we see the market settling near stronger support at 1,600," Spencer Yap of BPI Securities said in a report.

He said buying interest has begun to pick up with investors taking positions selectively, and further dips may prompt stronger buying support with interest centered on current favorites like the consumer, power and property sectors.

Among the gainers are Philippine National Bank, which rose on news the Bangko Sentral has approved in principle its rehabilitation plan; Meralco B, Fil-Estate Land and Jollibee Foods.

On the other hand, index issues which ended lower were Ayala Corp., San Miguel, Petron, Ayala Land, La Tondeña, PLDT, Metrobank, Equitable PCI Bank, JG Summit, Metro Pacific, Filinvest Development and Aboitiz Equity.

Yap believes that over the medium-term, market prospects are unlikely to improve significantly with the main index likely staying within the current trading range.

He said the weakening peso, uncertainties on the political situation, and weak full year results from several major index companies have conspired to keep buyers at bay.

Fellow BPI Securities analyst Roberto Cano added issues raised regarding the legality of the presidency of President Macapagal-Arroyo are creating an overhang in the market.

"Investors want to know government’s economic agenda and to see critical reforms such as the power bill put in place as early as possible," he said.

Also, tension in the Middle East and a weakening US economy have impacted negatively on US equity markets which may have accounted for the drop in participation by foreign funds in the local market as investors sought safety in US Treasuries and currency.

Yet, looming over the horizon is the elections in May. "Investors seeking validation for the current administration will look to the elections as providing some sort of mandate for the new Presidency; a clear majority in Congress for the incumbent administration will also ease concerns as to the passage of key economic bills," Yap said.