Market seen testing 7,000

Investors will be on the lookout for strong buying leads this week to sustain the climb of the benchmark index, which is poised to test the 7,000 level for the first time this year.

However, gains will be tempered by selling pressures amid high valuations and the impending traditional Chinese ghost month, analysts said.

“With a weaker-than-expected gross domestic product and a higher-than-anticipated inflation through the first six months already discounted into prices, investors will be looking for fresher leads to keep the index above 6,900 and towards 7,000,” said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

Calaycay said the main index might pierce through the 7,000 level but the question lies on sustaining trades above it.

“The continuity of last week’s momentum with 6,900 to 6,950 as the new support base will be tested, as volume turnout has been relatively modest,” said Jason Escartin, investment analyst at 2tradeasia.com.

For Freya Natividad, investment analyst at Papa Securities, tight trading might be seen given the tugof-war between the bulls and profit takers. Natividad pegged the resistance at 7,050 and support level at 6,850 to 6,900.

Week-on-week, the Philippine Stock Exchange index climbed 1.75 percent or 120.13 points to 6,962.28, its best since closing at 7,021.95 on May 31, 2013, given tempered inflation locally and record high rallies in Wall Street on the back of positive US jobs and manufacturing data.

But average daily turnover value slipped four percent to P7.2 billion last week. For this week, supply pressures and concerns of high valuation might put a lid on the uptick of share prices.

“We are the most expensive already in Asia. At the 6,962.28 closing, we are doing 19x price-to-earnings ratio, which is high already so we see a possibility of a breather,” Natividad said.

Natividad said profit takers will take the chance to book gains while some investors, looking at first half corporate earnings, are seen to recalibrate their portfolio with 2015 in mind.

“In case supply pressure emerges with the coming ‘ghost month’ in August, there might be possibilities for the market to trade within 6,800 to 6,900,” Escartin said.

Calaycay said orders on the long side might drop due to absence of new hints on the global economic recovery and ahead of the Bangko Sentral ng Pilipinas monetary board meeting late this month.