Index seen testing 6,000 level this week

MANILA, Philippines - The local benchmark index is poised to test anew the strong resistance level of 6,000 in another week that will likely be marked by sideways trading.

Select stocks are likely to perform better given strong headline profits while the main index builds a stronger base, analysts said.

“We expect the Philippine Stock Exchange index (PSEi) to trade sideways this week,” said Gregg Adrian R. Ilag, analyst at AB Capital Securities Inc.

“Failed attempts to break 6,000 would suggest that the range is still intact and that a pullback is highly probable,” Ilag said, adding that the bellwether index has ranged between 5,800 to 6,000.

For DA Market Securities Inc., the PSEi, which recently broke out of a downtrend that began in November, might move sideways and build a base this week.

“Chartwise, expect another break above 6,000, provided the 5,960 support holds,” said Jonathan Ravelas, chief market strategist of BDO Unibank Inc.

Week-on-week, the PSEi climbed 2.46 percent or 144.21 points to 5,987.09, allowing the main index to return to a year-to-date gain from end-2013’s 5,889.83. The broader all share index rose 1.61 percent or 57.79 points to 3,655.10.

“The PSEi is now trading at 15.73x 2014 price-to-earnings ratio (PE) and 14.43x 2015 PE versus peer market median at 13.33x 2014 and 11.73x 2015 justified by the 5.8-percent gross domestic growth forecast for 2014,” Ilag said.

For this week, Ilag said investors should look out for US economic data like existing home sales and unemployment claims. Locally, the government will be reporting November imports and trade balance, and December balance of payments.

DA Market Securities said the breakout from the 6,000 barrier could mean a return to strength towards the 6,265 and 6,482 resistance levels.

“I think we should find continuous activity and improving market volumes in the next few weeks,” said PSE president and CEO Hans B. Sicat.

Despite timid movements of the main index, Ilag said “individual stocks with strong headline profits should outperform.”

“Valuation upsides continue to be significant on a medium term horizon,” Ilag said, adding that investors should selectively position in the consumer, property and gaming sectors.