Market due for correction this week – analyst

Stocks are expected to take a breather after an extended run-up period although analysts believe the correction will be temporary as investors consolidate their positions and gear up for another rally.

"The market may correct (this week) following its recent run-up; it remains to be seen, however, if the market can consolidate its gains with the return of normal trading activity," BPI Securities vice president Spencer Yap said.

He said the pullback is technical in nature, or due to profit taking, but added the market has managed to hold on above the 1,150-point level, with buying getting more broad-based and less centered on a few select issues.

"The market has been building a base for a sustainable rally with investors counting on favorable economic and corporate results to fuel this recovery," Yap said.

AB Capital Securities head of research Jose Vistan Jr. noted that for the near-term, the market is already overbought but over the longer-term, the picture looks brighter as the risk reward potential of the market is favorable especially in a recovery scenario.

"The market is due for a pullback after rising so strongly. The correction will be minimal and the stocks are expected to sustain its run up in January, another traditionally strong month for the stock market," he wrote in the investment portal PhilStocks.net.

He also pointed out the market’s potential upside wherein unlike in other markets, local shares have not gone back to their pre-Sept. 11 levels. The Phisix was hovering above the 1,250-point level before that fateful event in New York.

He said as the threat of terrorism has diminished, the Philippine economy should be able to benefit from an expected recovery in the US economy by the second half of the year.

"The market’s recovery since its October lows is an indication of such fundamental optimism. There are those who are looking forward to a better 2002, believing that the market can’t get a whole lot worse than it has been in the last three years," Vistan said.

Although he warned other negative factors – the persistent coup rumors and the lingering Mindanao conflict – could place a recovery scenario on stand by as another unexpected shock could easily pull the economy back to the ground. "Unless there are clearer signs that distractions are to be minimized, we’re going to have a choppy recovery," he said.

Roberto Cano, also of BPI Securities, noted that the recent market rally was supported by volume, which suggested the return of investors interest in the market.

"However, we still need to see if this interest can be sustained moving forward by (this) week. If the market can sustain the uptick and if this will be accompanied by strong value turnover within the P400 million range, this would confirm strength in the market," he said.

Last week, the market extended its gains registered late last year, defying expectations of a correction with the start of the new trading year. The Phisix posted a gain of 21.81 points or 1.87 percent to end at 1,189.89 for the shortened trading week.

The advance also extended a year-end surge that has driven the main index up by 21.5 percent from its October low of 979.34.