Index retraces 7,000 level

MANILA, Philippines - The benchmark Philippine Stock Index (PSEi) may hit past 7,000, depending on the momentum but this is not too far out as market jitters from external factors have subsided, analysts said.

On Friday, the PSEi closed at 6,932.81, up by 107.43 points or 1.57 percent.

Jason Escartin of F. Yap Securities said there are still some catalysts that may push the PSEi upward throughout the remainder of the year.

“Gauges need to trounce past 7,000 towards 7,200 on strong momentum, to put the PSEi on course to its previous upward trajectory.  For now, the PSEi is still a long way from testing relevant resistance levels such as its simple moving averages. The closest may be the 7,000 mark, which could easily be breached, based on recent history,” Escartin said.

Barring unforeseen negative data, there may be positive catalysts moving forward. These include seasonal window-dressing, improved consumer spending during Yuletide holidays and relatively higher quarter-on-quarter earnings for the fourth quarter.

Thus, immediate support is seen at 6,850 to 6,900, with resistance at 7,000 to 7,050.

Hints from the US Federal Reserve to hike rates this December as shown in the minutes of the Federal Open Market Committee’s October meeting has reduced uncertainties over the medium-term.

“This should reduce uncertainty over the medium-term, a scenario preferred by players who aim to manage their risk-return expectations.  On the other hand, the prospect of certainty comes with caution.  The market has yet to see US employment for November, while closely watching the international scene for developments that could upset policy expectations,” Escartin said.

Furthermore, he said there’s growing optimism on expectations of robust economic growth in the third quarter of the year.

“The local equities may enjoy some gains in the run-up to the release of GDP data on Nov. 26. After which, some profit-taking may occur as news are factored into share prices.  More importantly, drivers of GDP growth, particularly government spending, will be scrutinized for sustainability,” he said.

Luis Limlingan, managing director at Regina Capital, expects follow-up advances on PSEi this week as oversold rallies have been triggered and momentum indicators have shown a short-term reversal.

“We see the index initially testing 7,044 to 7,093 resistance range,” he said.

If, on the other hand, both levels are breached, extended rallies to 7,160 are expected, he said.

“We anticipate strong selling pressure at that level so we are placing a ‘take profits’ trigger. However, this trigger may be lifted, depending on this week’s trend development,” he said.