Stocks seen consolidating at 4,240-pt level this week

MANILA, Philippines - With local share prices rallying over the past six consecutive weeks, the stock market is now ripe for consolidation with support seen at the 4,240-level, analysts said.

Last week, the Philippine Stock Exchange index (PSEi) added 44.74 points or one percent to close at 4,319.51, buoyed by strong inflows of foreign funds and encouraged by the spectacular run-up in Wall St.

Investors also cheered key economic figures released by the government which include a lower-than-expected budget deficit of P26.2 billion, which was well below the ceiling of P112 billion. This came about due to the combination of lower than programmed expenditures and higher than targeted collections. 

“While the markets abroad have been volatile, price fluctuations here have been tapering off. But even as volatility has slowed down, share prices are hovering overbought levels for more than a month now. The sustainability of the winning streak will depend on results of the major drivers we have mentioned for next week. If we don’t get any major surprises or other market moving catalyst, we should see the market go into a consolidation mode,” said Jun Calaycay of Accord Capital Equities.

Confidence has been growing on emerging markets, which are also seen to have more promising long-term fundamentals and earnings growth prospects than the more developed markets.

The resumption of trading in shares of San Miguel is expected to boost attract interest and boost market liquidity.

For this week, investors are watching out for the release of more earnings results and the April inflation data. Among those that are expected to release their first quarter financial results are Manila Electric Co., Aboitiz Equity Ventures, Aboitiz Power Corp. and Filinvest Land Inc. 

“The inflation data is important as it will be a major consideration in the Bangko Sentral’s next decision on monetary policy. We are projecting April’s inflation rate to be steady at around 4.4 percent compared to 4.3 percent last March. External markets, which have been volatile, will also continue to influence sentiments in the local market,” AB Capital Securities said in its weekly market report.

Analysts expect April inflation to fall within the 3.7-4.7 percent range, still within the government’s official target band of four percent.         

Inflation has increasingly become a thorn on the sides of global economies, both developed and emerging, primarily impacted by rising commodity and oil prices. Year-to-date Philippine inflation averages 4.1 percent, following a similar 4.3 percent pace in the last two months and 3.6 percent in January.    

On the macroeconomic front, investors may find yet another boost of confidence after the Japan Credit Rating Agency (JCRA) affirmed the country’s foreign and local currency long-term senior debts rating of BBB- and revising the outlook to positive from stable. A BBB rating, the fourth highest, “signifies an adequate level of capacity to honor financial commitments.”