Stocks to enter consolidation phase

MANILA, Philippines - Local stocks will continue to exhibit a lackluster performance this week as traders express continued uncertainty about the near-term outlook for the European and US markets.

Freya Natividad of local stock portal 2tradeasia.com said the market is seen to enter a consolidation phase given the absence of fresh leads.

“The PSEi’s latest declining top channel pattern (from 5,400 to 5,300) might mean consolidation in the coming weeks, especially after participation has slowed compared to previous quarters…We believe this trend would be prevalent over the short-term, as the market digests the release of interim results from large-caps to revalidate growth expectations,” Natividad said.

The main index ended in the red during a four-day trading week, plunging 22 points or 1.45 percent to close at 5,263.35. Turnover slowed eight percent to P4.81 billion as losers edged out gainers 93 to 65. Net foreign selling was P261 million, a reversal of the previous week’s P490 million foreign buying.

“With literally no sunshine to provide some positive sentiment in the local market, traders opted to take profits from the market, which is being perceived to be expensive. Moreover, investors fretted over the economic impact of the monsoon rains which is seen to have some inflationary impact,” AB Capital Securities said in an online report.

“The PSEi seems to be forming a symmetrical triangle which is converging to a narrower trading band. Bias could be negative and the short term correction could pull prices back towards the 5,200 psychological support level, which is also the 50-day exponential moving average of the PSEi,” AB Capital Securities added.

With the absence of fresh leads, investors will continue to monitor the remaining quarterly financial results.

AB Capital Securities said while fundamental and economic factors remain positive, these may not be enough to support a sustained market advance.

“Investors still have plenty to worry about beyond Philippine shores. Europe remains a source of concern with worries about a potential Spanish bailout keeping invests on edge. Europe’s debt problems haven’t shown much improvement as borrowing costs for Spain and Italy are uncomfortably high,” it noted.