Index seen hitting 7,700 level this week

MANILA, Philippines – The Philippine Stock Exchange index (PSEi) is expected to hit, the 7,700-level this week as investors continue to be optimistic on the prevailing market tide, analysts said.

Jonathan Ravelas, chief market strategist of Banco De Oro, said last week’s close showed the market could still go up.

“Chartwise, the week’s close above 7,500 levels continues to suggest the market has still some gas to try the 7,560 - 7,700 levels in the near-term. However, a break below 7,350 could prompt a much larger correction toward the 7,000 levels,” Ravales said.

Last week, the main composite index rose 1.38 percent week-on-week to close at 7,514.22.

This as local players received a boost of confidence from foreign investors, pushing the index to a high of 7,553.00 despite the high valuations, Ravelas said.

The market also received a big boost from the increase in share price of the country’s two telecommunications giants, Philippine Long Distance Telephone Co. and Globe Telecom after the two companies bought the telecommunication assets of diversified conglomerate San Miguel Corp.

At the same time, 2TradeAsia.com said the lack of major corporate news may convince players to stay on the sidelines.

“This is likely to result in a timely pause for the market, a much needed breather, in our view.  Since the May 9 presidential election, the PSEi has surged nearly seven percent and a respite appears forthcoming,” 2TradeAsia.com said.

It also said certain economic data set for release this week such as US unemployment claims and inflation in China may not be compelling enough for investors to aggressively load on shares at these levels.

On the local front, investors will be looking at Philippine inflation for May but this too is not seen to significantly stir-up volume in equities.

“Tame inflation might buoy up interest for consumer staples and retail, although stocks within these categories need to correct some more to generate attractive trading windows,” 2TradeAsia said.

On the monetary side, the central bank is planning a smooth implementation of the interest rate corridor (IRC) system which should provide market-driven benchmark rates.

At the same time, any indications for monetary tightening from the Fed could cap aggressive rises for now, before the Fed’s next meeting on June 15.

“The PSEi’s immediate support is seen at 7,300-7,400, resistance 7,550 to 7,600 respectively,” 2TradeAsia said.