Profit-taking seen to continue this week

MANILA, Philippines - High valuations amid mixed corporate earnings will likely encourage investors to continue pocketing their gains made from the recent strong climb of the stock market.

The selling momentum is seen to drag the market sans positive news, an analysts said.

“For this week, we expect the market to test support at 6,800 levels. Thereafter, the market may continue to consolidate to form a stronger market base,” said Gab Aguila, an analyst at DA Market Securities.

“I think the market will correct. It can be a sideways to shallow correction,” Miguel A. Agarao, an analyst at Wealth Securities Inc., said in a phone interview. Agarao said investors will find less motivation to further accumulate stocks in the absence of positive leads.

While the five-month upward trend channel remains intact, technical indicators showed signs of weakness in the local market, said Joyce Anne Ramos, an analyst at AB Capital Securities Inc.

“We expect the market weakness to persist...we place support levels at 6,740 and 6,700,” Ramos said.

Jason Escartin, investment analyst at F. Yap Securities, said immediate support is at 6,770-6,800 while resistance is at 6,850-6,900.

Week-on-week, the Philippine Stock Exchange index (PSEi) fell 0.43 percent or 29.55 points to 6,817.71, snapping seven consecutive weeks of gains.

On May 14, the PSEi closed at 6,880.44, its best since eending at 7,021.95 on May 31, 2013. But profit takers ruled the past two trading days.

Offshore cues of US markets selloffs and regional reactions prompted a number of investors to take profits, Aguila said.

“We believe that the pullback was caused by weak first quarter earnings results, hampered by mixed foreign economic data,” Ramos said.

For this week, investors will monitor overseas news, particularly with the end of the first quarter earnings season, analysts said.

“Potential volatility might commence towards the tail-end this week, following Ukraine’s May 25 presidential elections,” Escartin said.

Major updates to be released this week include the European Parliamentary elections, US preliminary gross domestic product, unemployment rate and trade balance, Ramos said.

AB Capital said investors should lighten their portfolios and accumulate near support levels.

“The climb is merited but we need a correction,” Agarao said.

For Escartin, investors should be cautious of stocks already trading at premium “unless convincing fundamental strategies are solidified to support growth.”