By James A. Loyola
After last week’s strong rally, investors are advised to be cautious this week as profit-taking is likely since the market is near a resistance level.
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“With the huge move that we saw (last) week, there is a strong possibility that we will see a pullback next week,” said Eagle Equities, Inc. Head of Research Christopher Mangun.
He noted that, “based on the technicals, the main index ended the week right at its major resistance areas between 7,740 and 7,800 which may cause some profit-taking from investors.”
“Caution is to be expected, having seen the PSEi move to an intra-week high of 7,801 during the initial trading week for the year,” said online trading firm 2TradeAsia.com.
It added that, “the focus is back on consumer and investment spending for the first quarter of 2019, which will provide a clearer view how specific industries would fine-tune their spending plan for the rest of 2019.”
Mangun said “trade numbers for 2018 are also set to be announced next week which is expected to come in with the largest trade deficit so far because of the increase in imports of capital goods and raw materials for the governments “Build, Build, Build” program.” The growth in exported products also slowed in 2018 despite the added incentives and tax cuts for exporters that was included in the TRAIN bill.
“However, there are some talks that as trade tensions mount between the US and China, some manufacturing firms may see opportunities here in the Philippines and choose to relocate here,” Mangun said.
Thus, 2TradeAsia.com said “players adopting a defensive stance may go for sectors that are likely to win direct investments’ favor for 2019. These are infra-based/related, energy and property companies.”
It added that, “consumer spending-driven stocks may also be considered, ahead of the May 13 election.” Abacus Securities continues to favor Wilcon Depot, especially now that Malaysia’s top home improvement firm is going public at a price that is double the market capitalization of Wilcon.
“A premium valuation for Mr. DIY would be a boon for Wilcon as the Philippines' rates of GDP and household formation growth are far higher compared to Malaysia's,” Abacus said.
BDO Unibank Chief Market Strategist Jonathan Ravelas said investors are betting Philippine equities could still do well and are buying blue chips that will benefit from a possible reversal of foreign inflows and positioning in stocks that will gain as inflation eases.
“Look for a close above the 7,800 level to signal that the assault towards the 8,000 levels has begun. However, failure to clear the 7,800 levels could trigger some profit-taking back towards the 7,300/7,500 levels,” he said.