Market seen climbing on positive local leads

MANILA, Philippines - Local positive news like strong corporate earnings and the possibility of another investment grade rating will provide leads for higher share prices this week, analysts said.

But some investors may stay on the sidelines due to cautiousness ahead of the US Federal Reserve’s policy meeting and profit taking from the recent rally, they said.

“As leads from overseas dry up, the domestic news cycle provides a good number of handles that should impel a positive spin to trades in the coming week,” said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

“We continue to hold the probable rise of the index past the 6,800 and tip the 6,900 as positioning ahead of earnings and take precedence over external influences,” Calaycay said.

Week-on-week, the Philippine Stock Exchange rallied 2.15 percent or 142.60 points to settle at 6,763.62. It marked the fifth straight weekly climb of the bellwether index.

Calaycay said the possibility of another credit rating upgrade, easing concerns over the tapering off of the US Fed’s monetary stimulus and strong corporate earnings will provide a buffer against headwinds.

Last week, Moody’s Investor Service placed the Philippines’ sovereign credit rating under review for an upgrade.

However, technical indications point to possible overbought levels for the main index, Calaycay said.

Jonathan Ravelas, chief market strategist of BDO Unibank Inc., said the bellwether index’s failure to stay above the 6,800 territory “casts a shadow of doubt to the recent rally and may see weakness to 6,630.”

For Astro del Castillo, managing director of First Grade Finance Inc., said some investors might turn cautious ahead of the Federal Open Market Committee’s two-day policy meeting this week. “Investors are cautious for the US Federal Reserve meeting,” Del Castillo said.

“We favor lightening up on strength between now and Aug. 15 and seeking better entry points ahead, perhaps late in August to mid-September,” First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said in a report.

FMIC and UA&P said that for the year, the local equity market remains on the positive side.

“Nothing has changed in the country’s fundamentals. The growth story is intact,” FMIC and UA&P said.