Stocks to move within a narrow range ahead of Q1 corporate earnings results

Local stocks are likely to move within a narrow range this week as the follow through buying that caused last week’s technical rebound could be capped by economic and corporate concerns, particularly as investors await firmer data on first quarter earnings.

"We expect the market to move on a tight range in the coming days with upside rather limited as macro and political overhangs would cap any rallies ensuing from any favorable news on corporate earnings," a report by RCBC Securities said,

At the close of last week’s trading, the Phisix revved higher on sustained technical buying, coupled by investors positioning ahead of the release of first quarter earnings.

The main index ended Friday at 1,068.15, up by 1,049.39 points or 1.8 percent from a week earlier.

"The main composite index formed a bullish engulfing pattern, signaling a near term reversal and more gains in the days to come. There was also optimism on the government’s revenue collection and abating SARS concerns," said Jose Vistan Jr. of AB Capital Securities.

He added the market would again be moving sideways after market players come back from the long weekend.

"Investors will be sidelined by the absence of a fresh catalyst after the war in Iraq and the downgrade on the country’s rating. We have the release of the export and inflation data coming (this week). These indicators may provide some lead on how the economy is headed," Vistan said.

He said the government and investors are sitting on pins and needles as they await the country’s fate, after Standard and Poors’ (S&P) downgrade on the country’s rating and another ratings agency Fitch and Moody’s set to release its own assessment.

"The worries are still on the deficit although revenue collections seem to be going on stream. The problem lies on the expenditure side since it is an election year. Interest rates are still stable but that may change with another downgrade," Vistan said.

A report by F. Yap Securities at the investment portal 2TradeAsia.com noted that while a generally upbeat mood could prevail at the local bourse, as day-traders go for technical trading opportunities in selected stocks, some risk-averse investors might opt to stay at the sideline, until firmer indications are in place on how first quarter corporate earnings would fare.

"Overall, short-term trading strategy is advised, as attention could still be sidetracked in favor of fixed-income and forex-related instruments," the report added.

The consensus among the analysts showed the Phisix might tread within a support level of 1,030 and resistance at 1,080 to 1,100 within the week.