Market may post technical correction this week

Share prices may undergo a technical correction this week after the local stock barometer posted significant gains last week, analysts said.

Victor Felix, equity analyst at AB Capital said the benchmark Philippine Stock Exchange index may correct next week but market investors may still see some catalyst with the upcoming speech of US Federal Reserve chairman Janet Yellen that could provide clearer messages on the US central bank’s monetary direction for the rest of the year.

“For next week, we can expect the market’s gains to wane, though the Fed speech could be a catalyst or a headwind, depending on their dovish or hawkish tone,” Felix said.

The index gained significantly last week, showing strength in the year’s first trading sessions.

“With strong participation, the sharp uptrend channel in our market could signify that it has bottomed out at the 6,500 level in late December. With foreign investors as net buyers, this possibly suggests that the fallout post-Fed rate hike has waned and that the market has fully priced this in. It is important to note that the Fed has a hawkish guidance of three more rate hikes for this year,” Felix said.

On the local front, Felix said, investors may also be positioning ahead of a strong full year corporate earnings, as well as a solid full-year economic growth rate that would place the Philippines ahead of its regional peers.

The government has a gross domestic product growth target of six to seven percent for 2016.

Investors would also be keeping a close watch on listed companies’ 2016 corporate earnings which, according to early indications, may see better-than-expected results especially for conglomerates.

“For next week, we shall be tracking China inflation and production data, US employment data, and the Fed Chair Yellen’s speech next Thursday that would provide more guidance for this year,” Felix said.

Furthermore, he said, the index may post a sharp uptrend channel in the near term.

“Though in a longer time period it still consolidates within the 6,000 to 8,000 range. Strong support is at the 6,500 level, with primary support at the psychological 7,000 level,” he said.

In all, he said the index’s immediate resistance is seen at the 7,341 level, with secondary resistance at 7,638.