MANILA, Philippines - A follow-through of fund managers’ portfolio rebalancing and episodes of bargain hunting will test the strength of the new 7,000 support level this week.
But a potential uptick will be kept in check by profit taking, supply pressures and geopolitical tensions abroad, analysts said.
“We believe that a follow-through upside movement will occur as many portfolio managers will have to adjust their funds to replicate the new equity weighting until the rebalancing effectivity on Sept. 1,” said Joyce Anne J. Ramos, an analyst AB Capital Securities Inc.
“As the former resistance at the 7,000 level has recently been turned into a support, we become a little more optimistic for the direction of the market,” Ramos said.
In a market report, online brokerage firm 2TradeAsia.com said portfolio repositioning based on 2015 prospects “will be at the core of fund managers’ attention for the remainder this year.”
Week-on-week, the Philippine Stock Exchange index (PSEi) rallied 1.86 percent or 128.17 points to end at 7,008.51. On Thursday, the bellwether finished at 7,061, the first time it closed above 7,000 this year that marked its highest since ending at 7,228.57 on May 29, 2013.
2TradeAsia.com said the receding geopolitical risks, and strong manufacturing and June exports aided sentiment during the week, allowing investors to focus on corporate income reports.
Ramos said the PSEi breached the 7,000-mark this week on the back of gains posted by index heavyweight Philippine Long Distance Telephone Company due to the quarterly rebalancing of the Morgan Stanley Capital International index.
Starting this week, investors’ rebalancing efforts might focus on specific sectors with strong upsides like the property, holdings and infrastructure given the public-private partnership program of the government, 2TradeAsia.com said.
“Start also revisiting those with regional prospects (consumer, transportation categories) and balance these with dividend bets and those supported by stable demand (utilities),” 2TradeAsia.com said.
Amid renewed optimism, Ramos said the breach of this resistance-turned support level could pull the market back to 6,875.
“As corporate earnings and foreign updates remain as market catalysts, cautious stance will mostly be observed by the investors,” Ramos said, adding that investors are advised to prudently take profits and cautiously accumulate at bargain prices.
“Be heedful of supply pressure as the market traverses new plane. Immediate support is 6,970-7,000 and resistance is at 7,100-7,200,” 2Trade-Asia.com said.