Market to consolidate further this week

MANILA, Philippines – The stock market will try to return to its winning ways this week with some inspiration from Manila’s hosting of the Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting.

Analysts, however, expect local stocks to continue with its consolidation as caution prevails among investors with the December US Federal Reserve rate hike just around the corner.

“We expect the index to face a lot of downward pressure this week, especially for the first two trading days as last Friday’s ‘doji’ may call for either an upward reversal or continuation of its prevailing weekly trend which is down,” Regina Capital Development Corp. managing director Luis Limlingan said.

Limlingan said the Philippine Stock Exchange index (PSEi) would need to recover and stay above the 7,000 level to maintain an upward trend moving forward. 
An intraday close below the 6,850 to 6,800 levels, however, could trigger selling and further corrections to as low as 6,720, he said.

“For the 3rd time since August, PSEi will be testing support below 6,900, but this time, with a less uncertain outlook on interest rates. We see 6,830 as the critical junction for the PSEi this week,” said F. Yap Securities investment analyst Jason Escartin.

Escartin said with the 2015 nine month earnings season winding down, players are seen to rebalance portfolios as some new themes emerge and replace those that have run their course.

Escartin said that with the nine-month earnings season already winding down, players are seen to rebalance portfolios.

He noted earnings growth for 2015 have shows signs of slowdown and as such market players would look for other catalysts that ramp-up momentum in 2016.

“Market participants are seen to stay selective, with the political spectrum in play for the first half of 2016,” he said.

Basic EPS – earnings per share – growth for PSEi constituents averaged 9.11 percent in 2015, versus EPS growth in 2014 at 22.17 percent.

“This suggests earnings growth for FY15 has slowed, prompting players to heed for catalysts that could ramp-up momentum for 2016,” he said.

The PSEi closed 3.10 percent or 220 points lower last week compared to the previous week on the back of expectations of the Fed’s rate hike this December.

Last week, average turnover increased slightly from the previous week at P5.79 billion with foreigners serving as net sellers at P62 million.

Analysts have place immediate support this week between 6,800 to 6,850 while resistance is at 6,950 to 7,000. – With Iris Gonzales