Range trading seen this week
Investors are advised to seize weaknesses to position on stocks with solid plans for 2018 while range trading is recommended for short-term investors.
“Revisiting capex plans to support expansion will be among the main corporate themes in the second quarter,” said oneline brokerage firm 2TradeAsia,com.
It noted that “headlines are already supporting this initiative and one should think of the final positive outcome as infrastructure projects are rolled up. Financing initiatives and expertise sharing should highlight alliances to hasten project completion.”
“Dialogues with China on its trade dispute with the US plus encouraging expectations on first quarter results might aid local equities’ advance,” it added.
The brokerage said “participants might start to refocus on positive angles in select shares, as growth potentials are revisited. Hunt for shares with solid upside potentials and trade the range. Immediate support is 8,000, resistance 8,0708,150.
BDO Chief Market Strategist Jonathan Ravelas said “market barometer PSEi traded sideways last week as market players continued to remain on the sidelines amid the rising tension and concerns over the trade war between US and China which resulted to the volatility in the global equity markets led by Wall Street.”
Chartwise, Ravelas said last week’s close at 7,945.66 “continues to signal further weakness towards the 7,500 to 7,800 levels is to be expected in the near-term. Immediate support and resistance is seen at 7,800 and 8,100 levels, respectively.”
Regarding prospects of an interest rate hike due to higher-than-expected inflation, Abacus Securities Corporation said “the BSP appears to be at least thinking of making a move.”
“However, officials may find themselves caught between a rock and a hard place. On one hand, they can't appear to panic if they raise interest rates in between policy meetings. On the other hand, however, they would be taking a major risk if they wait until the next meeting on May 10,” Abacus notes.
It added that, “April inflation will come out on May 5 and we believe there is a real possibility that inflation will breach 5.0 percent (using 2012 as base year).”
This is because the 4.3 percent inflation reported for March does not take into consideration the unavailability of NFA rice.
“If the PSA substitutes commercial rice prices into its computations, the impact will be significant. There is a 50 percent differential between NFA and commercial rice prices and rice accounts for 9 to 10 percent of the CPI basket.
“Our calculations show, therefore, that March inflation would have been 4.8 percent (2012 base) had commercial rice prices been used already. If we are correct that April inflation spikes to 5.0 percent or above, the narrative that the BSP is behind the curve will really take hold and a 25 basis point hike may be deemed too late,” Abacus said.