Investors to get cue from ME situation, corporate profits

Share prices slightly pulled away last week as bargain-hunting investors returned after a long Lenten holiday. For this week, analysts say trading sentiment will take its cue more on the series of recent events in the local and international fronts.

Online portal 2TradeAsia.com of local brokerage firm F. Yap Securities said in a report that buying interest at the market will depend on two factors: the sequel of events as well as the international investing community’s response to the US government’s pro-active response to resolve the Middle East conflict; and the continuity of Friday’s improved value turnover.

"While more investors might uphold the view that all these are mere temporary aberrations, the scale is tilted to those who believe that stock markets would benefit from lack of other attractive investment instruments given the liquidity in the financial system," the report added.

The Phisix gained 29.24 points or 2.08 percent week-on-week to end at 1,432.86 points, boosted by the continued decline in interest rates, as indicated by Monday’s Treasury bill auction results, as well as the country’s ratings outlook upgrade from negative to stable by international credit rating agency Standard & Poor’s.

"The upgrade on the credit rating has encouraged investors back to the market as this is a confirmation of the country’s improving economic performance. But investors remain tentative whether this would translate to an improvement on the corporate net profit performance," a similar website report at bpitrade.com, the Internet arm of BPI Securities, noted.

It added investors may be waiting for the release of first quarter earnings results to see if these support the economic recovery scenario but on the other hand, the uptick in crude oil prices may continue to dampen market sentiment as this may delay the economic recovery.

"We may see some corrective move next week; the tensions in the Middle East and the rapid rise in oil prices may provide the rational for the market’s eventual pullback," the BPI report said.

The same report added that despite the market’s generally positive mood last week, there was growing resistance as the market neared immediate resistance at 1,450.

"This is consistent with the trading pattern seen in the past where buying support slowed as share prices and valuation approach recent highs," BPI said.

For its part, RCBC Securities/(rcbcsec.com) advised long-term fund players to position in stocks that have promising upsides to unfold and have reached attractive support levels. These include Ayala Corp., Ayala Land, Meralco B, San Miguel A and Union Bank.

It said that while economic planners have not been giving signals for further rate cuts, the low inflation environment will nonetheless allow rates to be steady.

"The only imminent threat of course is the continued spike on world crude prices, unless the crisis between the Israelis and Palestinians are defused," RCBC added.