Market likely to slip into correction phase this week

MANILA, Philippines - The local stock market is likely to slip into a correction phase this week on fears that no imminent solution to the European debt crisis is at hand.

Last week, the Philippine Stock Exchange index (PSEi) went on a four-day winning streak, hitting new all-time highs but succumbed to profit-taking Friday to close at 4,613.83 as lingering concerns about the eurozone crisis continued to weigh on investor sentiment.

The PSEi reached an intraday record of 4,663.35 on expectations that the government would cut policy rates.

“The rally and optimism that we have seen may be tested next week as developments in Europe and US continue to unfold. This will still be a reason to be cautious,” said Maria Arlysa E. Narciso of AB Capital Securities over the weekend.

US stocks dropped Friday after news reports that Standard & Poors was set to downgrade credit ratings on several euro-zone countries including France and Austria.

Narciso pegged the PSEi’s support at 4,400.

She said all eyes would be on the impeachment trial on Chief Justice Renato Corona as well as the Monetary Board meeting this week.”In the past, political events such as this impeachment raise investors’ concerns over stability and cause jitters in the market,” Narciso noted.

Narciso said property firms are expected to benefit from a possible rate cut, further boosting mortgage demand and consumption.

She also sees promise in the power sector with demand expected to increase in the coming years. “The government has put the necessary framework, policy and law to encourage private investors to provide sufficient supply and meet this surge in demand,” Narciso said.