Shares seen to remain within tight range as investors take profits

Share prices will likely remain within a tight trading range this week as investors begin to cash in on their gains from the market’s run-up since November last year.

Analysts said despite the still prevailing positive sentiment, the market’s upside will be limited, with profit taking seen emerging as the main index approaches the key resistance level of 1,250 points.

Following several weeks of notable gains, the 30-company Phisix yielded to slight selling pressure on most blue chips although buying support firmed up later in the week to inch up 1.17 points or 0.14 percent to 1,191.60.

"Over the short-term, the market is expected to remain tightly bound within current trading range; we continue to be in an accumulation phase with investors taking positions in a wide range of issues," Spencer Yap of BPI Securities said.

He said while the longer-term outlook remains positive, the likelihood of a sustained rally would ultimately depend on confirming results on either economic or corporate performances.

"This could come as early as the second quarter but most likely in the second half. In addition, we would need to see increased foreign inflows into the stock market," Yap said.

He added that the favorable results of the recent $750-million global bond issue by the government has given a boost to the market’s confidence already anticipating a recovery in the domestic economy this year.

In its regular report, the investment portal PhilStocks.net said the market will likely be in a consolidation mode as the underlying positive optimism has already been factored into share prices.

"There will be weakness as investors lock in some of their profits. Sentiments have turned mixed although the market has been exhibiting some underlying optimism," the PhilStocks.net report said.

It added that the positive mood could have stemmed from the current low interest rate environment, which have resulted to significant liquidity among investors.

Low rates can lure investors out of interest-bearing instruments and into other investments such as stocks. A low-interest rates regime also encourages borrowing and it eases the burden of existing debts.

"Investors have got some good profits to take as the lack of forward momentum in the market wasn’t surprising given the run-up in the past three weeks. We are going to see a healthy correction for the next few days as the near-term corporate earnings announcements that are coming up are not going to be bullish news, so it’s a little early to see a sustainable rally," the report added.