Market still in consolidation mode sans rating upgrade

The local stock market is expected to remain in consolidation mode this week given the volatility in global markets and the absence of a rating upgrade from Fitch, dealers said.

Stock portal 2tradeasia.com said some fund managers will continue to keep a close watch on funds flow among bourses in the region prior to taking positions.

"The likelihood for pessimists to react might still prevail this week, especially after the local bourse registered net foreign selling worth P613 million last week versus prior week’s net foreign buying average of P192 million," 2tradeasia.com said.

Last week, the Philippine composite index or PSEi closed at 3,099.82, down 1.3 percent from the previous week’s 3,140, largely due to a marginal bounce in T-bill rates and the lower than expected 2007 earnings guidance from PLDT management.

"We believe that a period of consolidation after a very volatile couple of months is both to be expected and healthy. Locally, We don’t see investors making anything meaningful. Global stock markets are staging their own recovery rally after a traumatic sell off. However, we don’t think that this would translate to a return of our bullish ways in the short term," AB Capital Securities said.

AB Capital said it sees the market moving sideways, building a new base that will support a second advance later this year.

"Seasonal factors would seem to point to a downward bias but this should still be viewed as a welcome development. A pullback would make investors a lot more comfortable to re-enter the market. We believe that the market is far from being burned out as interest rates remain low while economic fundamentals are still solid," AB Capital Securities said.

2tradeasia.com said immediate support is at 3,000 while resistance is at 3,080-3,100.

"While some skeptics might still take advantage of intra-day rises to temporarily cash-in from the bourse, rallies are likely to move within a gradual upward channel, pending release of other fresh catalysts that could help support momentum until the second half of 2007," 2tradeasia.com said.

2tradeasia.com said market players will monitor the deployment of P25.2 billion proceeds from the government’s sale of shares in Philippine Telecommunications Investment Corp. (PTIC), which will be diverted for infrastructure and social-related undertakings.

Movements at the foreign exchange market will likewise be monitored, specifically for direct investments that will be plowed into highly-capital intensive industries such as mining/mineral-based/oil exploration, energy and cement, among others.