Tight trading seen this week

MANILA, Philippines - Tight trading will mark the week as investors take a wait and see stance while testing anew the strength of the 6,800 support level.

The reversal of external anxieties will help justify high valuations and temper profit taking, analysts said.

“Having breached 7,017, trading zones might be confined at 6,800-7,000 for now, until clearer directions are announced by the European Central Bank and the US Federal Reserve,” said Jason T. Escartin, investment analyst at 2tradeasia.com.

For Joyce Anne J. Ramos, an analyst at AB Capital Securities Inc., support level is at 6,800-6,900 as investors lighten their portfolio and wait for further pullback from high valuations before positioning anew.

“Following a mild roller-coaster ride in the immediately preceding week, investors are seen to take a pause and wait for new leads when trades resume,” said Justino Calaycay Jr., an analyst at Accord Capital Equities Corp.

Week-on-week, the Philippine Stock Exchange index (PSEi) slipped 0.88 percent or 61.19 points to close at 6,901.09, snapping a two-week ascent, with all subindices posting losses due to profit taking. The
broader all shares index fell 0.55 percent or 22.99 points to 4,136.50.

On Monday, the benchmark index pierced through the 7,000 level for the first time this year amid continuous optimism in global equity market. It closed at a fresh 13-month high of 6,999.10 despite retreating from
an intraday high of 7,016.71.

Ramos said high valuations remain a concern among market participants. At 6,901.09, the PSEi is trading at 21.82x price-to-earnings ratio, way above its neighbors.

For this week, notable economic updates include US Fed chairman Janet Yellen’s testimony before the Senate, US consumer sentiment and China’s economic performance.

Calaycay said investors should also consider developments in Europe’s banking sector and political tensions in the Middle East.

“Alternatively, positive developments on both local and domestic scene will open the windows for a test of the 7,000-resistance line,” Calaycay said, adding that support level is at 6,900 with a possible further retreat towards 6,830-6,850.

Escartin said that once external anxieties subside, investors should aim for stocks ripe for accumulation. He pegged the immediate support at 6,800 and resistance at 6,970.