Stocks seen trading in narrow, sideways range

MANILA, Philippines - Local stocks are expected to trade in a narrow, sideways range this week as investors await fresh leads and keep an eye on developments overseas, analysts said.

Last week, the Philippine Stock Exchange index (PSEi) climbed 6.55 percent to close at 4,129.54, propelled by the rise on telecom stocks particularly Philippine Long Distance Telephone Co.’s acquisition of a majority stake in the Gokongwei-owned Digital Telecommunications Philippines Inc.

 “Investors return to the market this week in want of fresh leads. On the first full week of the second quarter, the impact of the TEL-JGS deal on Digitel would have lost most of its luster. Attention is expected to refocus to external events which rather took the back seat last week,” said Jun Calaycay of Accord Capital Equities.

Calaycay said some investors might resort to profit-taking as most stocks have reached overbought levels.

“The 6.55 percent rise, mainly on the back of a strong 12.44 percent surge in the service sector, has brought the market deep into overbought territory, raising the possibility of a correction that will test the validity and sustainability of the advance. Only the property sector leaves some room for a further upside,” Calaycay said.

Calaycay, however, said despite the PSE’s recent ascent, local equities continue to trail its global peers, which have already registered year-to-date gains. “We are joined by disaster struck Japan, Taiwan and Singapore under 2010 closing levels. US and European markets are all in the green over the same period,” he said.

He said that while average daily value turnover picked up after last week’s trades, bringing the year-to-date level at P4.4 billion, it is still 4.4 percent less than the full year 2010 average.

Calaycay, however, said foreign activity has picked up with their aggregate daily average purchases rising by nearly two percent.

On investors’ watchlist is the inflation figure for March, which is expected to be released towards the latter part of the week.

“Trades moving forward will be a balance of developments in the MENA region, Europe’s debt crisis, Japan’s reconstruction and recovery efforts, China’s inflation and continuing restrictive monetary stance and the pace of US economic recovery,” Calaycay said.

AB Capital Securities’ Maria Arlysa E. Narciso said that while most economic concerns are now out, she still believes that the second quarter may turn better.