Shares to move sideways after last week’s rally

STOCKS MAY move sideways in the week ahead as a breather is expected to support the main index’s rally in the coming days.

The benchmark Philippine Stock Exchange index (PSEi) dropped 1.01% or 81.14 points to close at 7,904.09 on Friday, albeit rallying for most of the week to record a 1.84% weekly increase or 142.98 points. The services and holding firms counter pushed the market as they gained 4% and 3.6% for the week, respectively.

Foreign investors figured heavily in the market, registering a net buying figure of P4.47 billion for the week. Market breadth was also positive, with 104 gainers versus 95 decliners.

“The market can go either way [this] week, we may see a pullback as markets around the world performed extremely well [last] week and some profit taking may take place,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.

“A pullback scenario is more favorable for our market right now as we don’t want to see it go “too far, too fast” and it also gives more investors the chance to get in at lower prices.”

Despite expectations of profit taking, Mr. Mangun noted the market is not showing any signs of slowing down, especially now that the PSEi is approaching the 8,000 mark.

“However, if we continue to see this pick up in foreign fund inflows, then we might just see the main index touch 8,000 and perhaps even break through it with conviction... Whichever way it goes [this] week, we are still extremely bullish on this market,” Mr. Mangun explained.

For online brokerage 2TradeAsia.com, a breather will help support the main index’s ascent.

“In the coming weeks, however, it would be prudent to visit on fundamentals, to check on the strength of listed companies’ business models,” the online brokerage said in a weekly market note.

The chief concern among investors for the moment is the P21.6-billion default of Korean shipping giant Hanjin Industrials, which involves five of the country’s largest banks namely Rizal Commercial Banking Corp., Metropolitan Bank & Trust Co., Bank of the Philippine Islands, BDO Unibank, Inc., and Land Bank of the Philippines.

2TradeAsia.com, however, remains positive on the banking sector as their loan exposure is small compared to their market caps.

“Aside from being a collateralized facility, our correspondence with some of related names assured of readied provisioning & the size of their exposure is relatively small vis-à-vis capitalization... However, the Hanjin issue would likely tighten risk management controls in the near term, which could lengthen credit approval processes,” the brokerage said.

Eagle Equities’ Mr. Mangun placed the market’s support level at 7,700 to 7,800, with resistance from 8,000 to 8,300.

PSEi: 7,904.09