Market seen taking a breather this week

After reaching a new 10-year high last week, the market may take a breather as investors get a clearer picture of policy makers’ next move on the widely-monitored benchmark interest rates.

First Metro Investment Corp.’s Junie Banaag said some investors may lock in gains as the main index extends nearer the 3,400 barrier.

Share prices reached the 3,381 level last Thursday but Friday’s profit-taking cut the week’s gains. The index, however, managed to hold safely above the 3,300 support mark on better-than-expected earnings results of several listed firms.

“It’s a good thing the market corrected its recent gains so that the rally will have better legs before eventually attempting to break into record territory,” said AB Capital Securities in its weekly market report.

Stock portal 2tradeasia.com said last week’s average daily net foreign buying of P429 million last year was much lower than the previous week’s P1.17 billion.

“Market players might start pricing in expectations for possible 25 to 50-basis point rate hike for subsequent sessions,” 2tradeasia.com said.

“We might still see prospective buyers retaining their wait-and-see stance for now, unless significant news come up to support aggressive rises past 3,300-3,350,” said 2tradeasia.com.

“Immediate support is at 3,220 while resistance is at 3,300,” 2tradeasia.com said.

AB Capital Securities believes that the corrections will be short-lived as the peso continues to strengthen against the dollar and as benchmark borrowing charges remain within single-digit levels.

The peso has appreciated to a new six-year high and may further strengthen given the trend in foreign fund inflow.

“Although economic and corporate fundamentals are very positive, this may have already been factored into current share prices. Moreover, there is also the possibility that interest rates may have already bottomed out. A reversal in money market rates could be a catalyst that could finally propel the market to a major technical correction,” AB Capital Securities said.

Among Banaag’s stock picks are Republic Cement and IPVG, which is involved in some of the fastest-growing industries, namely bandwidth/data center, Internet gaming and call centers.