Market rally lacking ‘conviction’ – analyst

AN ongoing stock market rally may not be sustained this week, an analyst said, with investors continuing to be on the lookout for catalysts.

The benchmark Philippine Stock Exchange index (PSEi) gained for three straight days last week to return to the 6,200 level on Friday after spending some three weeks below that.

Week-on-week, the bourse ended 0.81 percent higher at 6,211.89.

The run last week was said to have been boosted by a slowdown in the United States October inflation print and the Bangko Sentral ng Pilipinas’ decision to keep interest rates unchanged.

Philstocks Financial Inc. senior research analyst Japhet Tantiangco said that despite having corrected higher, the PSEi remained at bargain levels with a price-earnings ratio of 13.41x, still lower than the last five years’ average of 19.08x.

“Still, this alone may not lead to a sustained rally as investors are expected to watch out for catalysts that would point to a better economic outlook,” he said.

Based on year-to-date performance, Tantiangco said the stock market was continuing its downward trend and that value turnover “remained tepid”.

This implies that the PSEi’s three-day winning streak still “lacked conviction” and as such, “investors are advised to remain careful.”

Rizal Commercial Banking Corp. chief economist Michael Ricafort said investors would be looking forward to the release of October balance of payments today as well as additional economic data out of the US.

Online brokerage 2TradeAsia.com, meanwhile, said stabilized economic indicators and strong corporate fundamentals could help the bourse “get past the current trading band” of 6,000 to 6,400.

Market participation, however, is also expected to remain thin as the December holidays near.

“That being said, lulls may be opportunities to lock in bargains amid funds’ window-dressing and portfolio reallocation ahead of the New Year,” the online brokerage said.

Chartwise, immediate major support levels are seen between 6,040 and 6,080 while immediate major resistance is expected to range from 6,220 to 6,300.