Market headed for another consolidation phase — analysts

The stock market is headed back to a consolidation phase and investors are advised to take the usual wait-and-see stance ahead of the release of more corporate 2001 earnings reports and other economic news.

"The market is likely to continue with its correction until fresh news would provide some strength to break the downward momentum. We suggest that investors adopt a wait-and-see attitude until the market shows signs of stabilizing," said Roberto Cano, a senior analyst at BPI Securities.

The 30-company Phisix ended the past week lower by 41.96 points or 4.41 percent to 1,344.35 to practically wipe out the previous week’s euphoric rise to a six-month high.

"We are in the initial stages of a technical correction. Following the failure of the index to break out of the 1,390 resistance, stocks may drift sideways to lower in the coming sessions. The market’s next major support level is seen at slightly below 1,300," said Jose Vistan Jr., research head of AB Capital Securities.

He said while there were more positive news for the market to digest last week, including President Arroyo’s $1.2-billion investment pledges from her latest trips abroad and the credit rating upgrade by Moody’s, stocks still failed to sustain the positive momentum built up over the last seven weeks "as we needed a technical correction in order to sustain a bigger runup in the medium to long term."

Vistan said with very little economic news in the pipeline, the market will just go through the 2001 corporate earnings reports for possible leads.

"The lack of fresh leads should keep the market in a consolidation mode. The bias is likely to be downwards as the market’s valuation is relatively higher than its Asian counterparts and we’ve been in a strong rally over the last seven weeks. Volume will be thin as Asian foreign fund managers will be on vacation due to the Chinese New Year," he added.

He pointed out some interest may be rekindled if the Bangko Sentral ng Pilipinas (BSP) chooses to cut interest rates again, but such optimism may be dampened by the possibility that it may be the last cut. "We believe that inflation has hit rock bottom last month and should slowly trend higher for the rest of the year," Vistan said.

In January, the nationwide inflation rate dropped to a 21-month low, raising the possibilities of another interest rate cut. But the positive tone was offset by reports that December exports fell by 24.4 percent to $2.643 billion as shipments were adversely affected by the weakened economies of our major trading partners led by Japan and the US.

"Investors will still have more time to wait as we would see a gradual rebuilding in buying momentum. Still, the market’s correction should offer investors an opportunity to accumulate selected strong counters on dips," Vistan said.