Market players seen taking short-term positions

MANILA, Philippines - Local stocks will continue their struggle for direction as investors fret over China’s shrinking manufacturing activity and renewed concerns that the euro zone cannot avert recession.

The Philippine Stock Exchange index (PSEi) shed two percent or 103.45 points last week as investors pocketed gains after data showed China’s factory activity fell for a fifth consecutive month to end at 5,042.44.

“While we expect bargain hunters to begin to surface as the index tests support at the 4950-4970 range, the near-term bias favor liquidation ahead of the Lenten break after next week,” said Jun Calaycay of Accord Capital Equities Inc.

“Funds may begin to make short term positions as the Philippine market takes an extended break to Easter. In this context, we may see a dissipation in over-all activity with a slight bias on the sell side,” Calaycay added.

AB Capital Securities said losses would be minimal as profit taking could be offset by some quarter ending window dressing.

“Investors are using the slow down in China and Europe as a comfortable excuse to lighten up. Moreover, concerns on inflationary pressures from rising oil prices are also providing a negative backdrop,” AB Capital Securities said.

German and French manufacturing also suffered a sharp decline, fueling worries about a slowdown in the global economy.

Calaycay, however, believes this profit-taking, and short-term geographical fund rotation will open the doors for an expected post-Easter resumption of the bullish trend.

 “Although a breach below the 5000-level is not discounted, we are confident that the index will over the medium-term, will be able to hold above this mark,” Calaycay said.

AB Capital Securities said equities will remain the most attractive investment choice as long as rates don’t shoot up sharply.

“Technically, the local market’s risk reward has become unattractive due to the market’s strong run up. The PSEi is closer to the upper band or resistance of its long term uptrend channel. All major oscillators are overbought and some of them have developed negative divergences as against the PSEi,” AB Capital Securities pointed out.