Shares may drop on profit taking, lack of leads

LOCAL EQUITIES are expected to trade with a downward bias this week as investors are expected to pocket their profits as they await fresh catalysts.

The bellwether Philippine Stock Exchange index (PSEi) gained 76.43 points or 1.17% to end at 6,606.94 on Friday, while the broader all shares index went up by 30.40 points or 0.88% to 3,452.44. 

Week on week, the PSEi rose by 169.56 points or 2.63% from its close of 6,437.38 on Nov. 18.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message that the PSEi went up on Friday on expectations that the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) will deliver smaller rate hikes moving forward.

Minutes of the Fed’s Nov. 1-2 meeting, where they delivered a fourth straight 75-basis-point (bp) hike, showed a “substantial majority” of policy makers agreed it would soon be appropriate to look at smaller increases.

The US central bank has raised rates by 375 bps since March in its fight versus inflation, bringing the fed funds rate to a 3.75-4% range. Its next meeting is on Dec. 13-14.

Meanwhile, the BSP on Nov. 17 raised benchmark interest rates by 75 bps to rein in rising prices, bringing the policy rate to 5%, the highest in nearly 14 years. It has hiked by 300 bps since May.

BSP Governor Felipe M. Medalla last week ruled out further outsized or off-cycle increases, but said they will need to keep on raising borrowing costs as the Fed’s tightening cycle continues. The Monetary Board’s next review will be held on Dec. 15.

“The PSEi climbed above 6,600 level as foreign investors continued to flock into the Philippine market in hopes of a potential year-end rally and amidst sustained appreciation of peso against the dollar,” AP Securities, Inc. Equity Research Analyst Carlos Angelo O. Temporal said in a Viber message.

The peso last week returned to the P56-per-dollar level for the first time in two months and closed at P56.67 on Friday, up 11 centavos from its P56.78 finish on Thursday, Bankers Association of the Philippines data showed.

“The local market exhibited weakness on Monday given high selling pressure, but capped off the week on a strong note, closing above the critical 6,600 resistance level,” China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an e-mail on Friday.

For this week, Mr. Mercado said the market may move sideways as investors are expected to pocket gains from the market’s rise and amid a lack of catalysts.

“We maintain our view that the prevailing bullish momentum may begin to lose steam on lack of major catalysts. We still think that the market is due for a pullback as hefty accumulated gains made over the past six weeks may prompt wider profit taking,” Mr. Mercado said. 

Meanwhile, AP Securities’ Mr. Temporal said investors will likely take cues from the US market.

Mr. Temporal placed the index’s support and resistance at 6,400 and 6,700, respectively, while online brokerage put the PSEi’s support at 6,400 and resistance at 6,800. — Ashley Erika O. Jose