PSEi may challenge 7,300 level this week

The benchmark Philippine Stock Exchange index (PSEi) is expected to challenge the 7,300 level this week, analysts said.

The PSEi snapped out of a foursession run last week, narrowing the benchmark’s gains to just 0.2 percent.

“While it dropped back into the previous trading band, the index stayed above the declining resistance line, which together with the horizontal support at 7,170 draws the bearish descending triangle pattern,” said Justino Calaycay of A&A Securities.

For their part, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said the country’s economic fundamentals remain intact, driven by domestic demand and boosted by infrastructure spending.

In a report, FMIC and UA&P said the country’s strong fundamentals have already been taken into account by market investors.

“These, however, have already been priced in by investors. We do not expect price-to-earnings ratio to expand given global and local policy uncertainties, our expectation of higher interest rates, and the Philippine market already late in the equities cycle. Returns will likely come from a combination of selectivity and active/nimble management,” the report said.

Amid the on and off market volatility, FMIC and UA&P recommend certain stocks such as banking stocks given the ample room for interest margin expansion and loan growth; infrastructure due to doubling in the government’s infrastructure budget to P860.7 billion in 2017; and consumer staples as these benefit first from an increase in disposable income and tend to show visible earnings prospects.

Last week, foreign funds have been on the buy-side in the last two sessions, but still not enough to over-turn the net selling average for the period, which settled at P209.27 million per day.

Foreigners have so far sold P237.6 million per day compared to average net purchases of P12.97 million in January.

Jonathan Ravelas, chief market strategist at Banco de Oro said last week’s close at 7,258.99 continued to suggest the market would remain range bound between the 7,000 and 7,400 levels in the near term.

“Only a move above the 7,500 levels will call the bulls back to play,” he said.