Market rally at risk from profit takers

Investors will be on the lookout for fresh catalysts this week which, if successful, could propel the stock market to the 6,900 level, or even back to the 7,000 mark.

However, analysts see recent gains as a cue for some investors to pocket profits.

“The local market may see more selling pressure emerge this week as it tries to surmount the 6,900 level. The base case is for the index to continue consolidating in the 6,750 to 6,950 area,” China Bank Capital Corp. managing director Juan Paolo Colet said.

He said the hotter than expected US January producer prices and a potential delay in US policy rate cuts may give investors reasons to take profits.

“Nonetheless, resilient buying appetite could provide market support especially if we see sustained net foreign inflows. Traders will take their cue mainly from US and China markets for direction,” Colet said.

Despite closing in the red last Friday, the benchmark Philippine Stock Exchange index (PSEi) managed to gain 0.34 percent week-on-week with its 6,873 finish.

“The local market remained bullishly biased, extending its rally for another week,” Japhet Tantiangco of PhilStocks Financial said.

He said trading activity, however, was tepid with net value turnover last week averaging P4.42 billion per day, lower than the year-to-date average of P4.58 billion.

“With its four-week rally, the local market is seen to be susceptible to profit taking,” Tantiangco said.

“Hence, this week, investors are expected to be on the lookout for fresh leads that can provide support to the bullish sentiment. Without such, we may see profit taking this week which could lead to a pullback for the market,” he said.

Tantiangco said investors are expected to wait for the fourth quarter and full year 2023 corporate results reports.

Investors may also look to Wall Street to see if it will continue with its record performances, he said.

Immediate support is seen at 6,700 to 6,800, while resistance is at 7,000.

The FMIC & UA&P Capital Markets Research anticipates the PSEi to hit the 7,000 to 7,500 range within the year, following a period of correction in the second quarter.

“PSEi has landed in an overbought position after reaching 6,850 by midFebruary. Slight overweighting by MSCI in its rebalancing by end-February, robust macroeconomic data as well as potentially strong corporate earnings in Q4 2023 and Q1 2024 should limitthe downside,” it said.