Tight trading seen this week

MANILA, Philippines - Philippine stocks are expected to trade at a tight range this week as investors are seen taking a closer look at the latest corporate earnings data and outlook for next year.

Market breather in the shortened trading week should be taken as a buying opportunity ahead of a fourth quarter run-up, analysts said.

“We expect the market to move sideways in anticipation of nine-month local corporate earnings, the lack of leads from the US, regional market weakness and the initial public offerings (IPO) this coming month,” said Maria Arlysa E. Narciso, an analyst at AB Capital Securities.

“Limited trading bands are seen as market players assess nine month corporate earnings, including validation of capital expenditure rollout for fourth quarter towards first quarter 2014,” said online brokerage firm 2Trade-Asia.com.

For Freya B. Natividad, investment analyst at Papa Securities Corp., the main index is ripe for correction as the market builds a stronger base for another rally.

Week-on-week, the Philippine Stock Exchange index (PSEi) slipped 1.02 percent or 68.02 points to 6,539.81, snapping back-to-back weekly gains.

The local bourse gave a sigh of relief on hopes that the US Federal Reserve’s tapering of the monetary stimulus will not start until the first quarter of 2014 but lackluster trading encouraged investors to take profits, said Jonathan Ravelas, chief market strategist of BDO Unibank Inc.

For this week, earnings reports will take the spotlight, analysts said. Financial markets are closed on Monday for the barangay elections.

“Positive outlook on earnings would support the market’s rally but for now, it is more on short-term and technical breather,” Natividad said.

“We are now more focused on the local news,” Astro del Castillo, managing director of First Grade Finance Inc., said in a phone interview.

Potential gains this week will also be tempered by liquidity-sapping IPOs. For instance, Resorts World Manila owner Travellers International Hotel Group Inc. and the Gokongwei family’s Robinsons Retail Holdings Inc. are raising $473 million and $650 million, through an IPO, respectively.

Miguel A. Agarao, analyst at Wealth Securities Inc., pegged the initial support level at 6,500, with the second support at 6,350.

“The PSEi will continue to move sideways and at a range of 6,265 to 6,670 this week,” Narciso said.

Natividad said the support level is at 6,450 to 6,500 while the resistancce level is 6,600 to 6,650.

“Nevertheless, this lull would be ripe to gradually build-up on equities, especially towards 2014,” 2Trade-Asia.com said, adding that immediate support is 6,500 and resistance is 6,600 to 6,630.