Bargain hunters seen taking over stock market this

The stock market may continue to pull off a rally this week as bargain hunters take centerstage, but analysts remain wary of its sustainability as the "dark clouds" of external concerns and foreign-led selling still hang over the market.

"The market may continue to drift aimlessly as it alternates between light buying and selling. Again, sustainability of any trend remains suspect as investors will have difficulty making up their minds on this type of market," AB Capital Securities research head Jose Vistan Jr. wrote at the investment website PhilStocks.net.

He said even as the local economy is seen as transitioning toward one that favors an upturn in share prices, investors are still grappling with external worries such as the slowdown in the economies of the US and Japan and the general weakness in global markets.

"We still view the market’s rally with suspect. We’ve seen several upturns in the past only to see them turn down again later. A broader and sustainable rally can only be achieved with better breadth and volume. Such conditions can only be achieved once economic fundamentals both here and abroad stabilize, something which has so far eluded the market," Vistan said.

Last week, share prices plunged to a near eleven-month low before bouncing back to life, bolstered by the release of positive economic figures (GDP and inflation) and continued interest in PLDT, the biggest gainer among the big cap issues. At the end of the week, the main index managed to gain 31.91 points or 2.52 percent week on week to settle at 1,297.35.

"Stock movements appeared bullish but seemed to lack broad support as volume remained thin. While the indices are oversold and could continue to rally in the short term, we are expecting to encounter resistance at the 1,330 level," Vistan said.

Spencer Yap of BPI Securities noted that the market has held at the 1,250 support as foreign selling on selected blue chip stocks like PLDT, Meralco B, Ayala Corp. and SM Prime has apparently abated.

"This has allowed bargain hunters to regroup and reposition on these issues. There has always been pent-up demand, but buyers in the past had been beaten back by the ferocity of foreign selling. It may be possible for the market to now test the 1,300 resistance; this, however, will depend on the absence of foreign selling," Yap said.

He added that if the market creates enough momentum to break the 1,300 to 1,320 resistance range, this might bring more confidence in the market.

"There were still signs of bargain hunting or accumulation on some major index issues. However, some investors also took advantage of the market’s rally to liquidate their positions which has limited the market’s rise," Yap said.