Stocks seen in tight range

MANILA, Philippines - Local stocks are expected to trade in a tight range this week given the absence of fresh leads as investors keep an eye on developments overseas.

” We see the main index trading tightly next week, the next resistance should be at 4,545, while support is at 4,377, both of which is based on Fibonacci levels,” said Gregg Adrian R. Ilag of AB Capital Securities.

The Philippine Stock Exchange index (PSEi) finished strong on the first week of trading for the year, gaining 2.41 percent as investors cheered the slower-than-expected December inflation.

Expectations of increased public spending in the first quarter also buoyed market sentiment.

Last week also saw the implementation of the new trading schedule which allowed afternoon trading. 

Investors will continue to look at developments in Europe with banks showing liquidity problems and soaring borrowing costs.

Accord Capital’s Jun Calaycay said it was early to make a judgment whether the extended trading activity lived up to its purpose of boosting liquidity.

“Initial numbers show that last week’s performance improved year on year, albeit generally slower compared to 2011 averages,” Calaycay said.

Daily volume and value turnover rose to 3.47 billion shares from P3.06 billion and to P4.66 billion from P4.32 billion in the first week of 2011, respectively.

Calaycay said foreign buying has improved, amounting to an average of P587 million or more than three times the level in last year’s opening week and twice than 2011’s P230.8 million.

Nevertheless, Astro Del Castillo, managing director of First Grade Holdings, believes that extending trading hours until 3:30 pm is a step in the right direction and aligns the local bourse with regional markets.

“We have to be consistent with the rest of the world.  The trading extension should allow investors to react to developments in other markets in different time zones,” Del Castillo said.

Meanwhile, Ilag has  advised investors to stick to construction, energy and conglomerates as he expressed caution against sectors that have exposures abroad.

“We think that conglomerates continue to be in a more strategic position in terms of bidding for PPP projects and actually winning them,” he said.

“The positive future for the energy sector remains because of the projected strong demand for electricity in the coming years. Meanwhile, the construction sector will indirectly benefit in these PPP projects as they get contracted by the concessionaire,” Ilag said.