While there is already some selling pressure, the local stock market is seen to retest the 7,000 resistance level this week as sentiment remains bullish on the back of good economic numbers.

Philstocks Financial Research Manager Japhet Tantiangco said, “the local market remained bullishly biased” but noted that trading activity was tepid last week with net value turnover averaging P4.42 billion per day, lower than the year-to-date average of P4.58 billion. 

“With its 4-week rally, the local market is seen to be susceptible to profit taking. Hence, next week, investors are expected to be on the lookout for fresh leads that can provide support to the bullish sentiment,” he said. 

Tantiangco added that “without such, we may see profit taking next week which could lead to a pull back for the market. Investors are expected to wait for fourth quarter or fiscal year 2023 corporate results reports. Investors may also look to Wall Street to see if it will continue with its record performances.”

China Bank Capital Corporation Managing Director Juan Paolo Colet said, "the local market may see more selling pressure emerge this week as it tries to surmount the 6,900 level. The base case is for the index to continue consolidating in the 6,750 to 6,950 area."

He noted that "hotter than expected US January producer prices and a potential delay in US policy rate cuts may give investors reason to take profits. Nonetheless, resilient buying appetite could provide market support especially if we see sustained net foreign inflows."

"Traders will take their cue mainly from US and China markets for direction. The fourth quarter earnings release of AI chipmaking giant Nvidia is also highly anticipated given its outsized contribution to the tech-fueled US rally," Colet added.

Online brokerage firm 2Tradeasia.com said that while the Bangko Sentral ng Pilipinas left benchmark rates unchanged as expected, its inflation forecast has been bumped to 3.9 percent in 2024 (from 4.2 percent in the previous December meeting), hinting at more favorable inflation backdrop this year.

This will also mark a full return to the two percent to four percent inflation zone that the economic team has strongly targeted. 

“This increased confidence in the broader macro should help local equities get more liquidity over the medium-term, and further reinforces some reallocation to growth from pure value as capex spending strengthen,” 2Tradeasia.com said.

It added that “a retest of the critical 7,000 level is within sight-this might be the PSEi's biggest acid test for the first quarter, with selling pressure looking strong at this level (last visited early February 2023).”

The brokerage advised clients to buy into the market even as turnover has remained thin and “compelling earnings results and more data points supporting sunnier macro-fundamentals are needed to push cold money into deployment.”

Following the recent rally in stock prices, Abacus Securities Corporation advises investors not to chase prices as there would be numerous opportunities to initiate and add positions when the stock market takes a breather.

It said prices can drop if the March inflation accelerates, if the first quarter gross domestic product comes in lower than expected, or if corporate earnings disappoint.

With this in mind, Abacus advises its clients to stick with stocks that are seen to continue to lead the charge such as BDO, Bloomberry, GT Capital, Metrobank, DMCI Holdings, Wilcon Depot, and ICTSI.

Another stock pick of Abacus is Manila Water as it noted that the utility will see a cumulative rate increase of 76 percent in basic water charge from 2023 to 2027.

“However, despite this expected jump in revenues (34.4 percent from 2022 to 2024), the stock’s 2024 price to sales ratio has drifted downward,” said the brokerage firm, adding that the stock is now trading at 1.4 times its sales—even lower than where it was before the approval of its rate hikes.