Shares to move sideways on profit taking, BSP

THE MARKET is expected to trade sideways this week as investors look forward to the start of the government’s coronavirus disease 2019 (COVID-19) vaccination program and following the central bank’s decision to keep interest rates at their current record lows.

The benchmark Philippine Stock Exchange index (PSEi) declined by 91.14 points to close at 6,991.01 on Thursday from its 7,019.18 close on Feb. 5. Financial markets were closed on Friday in observance of Chinese New Year.

The market’s average value turnover went up by 23.97% last week to 12.36 billion.

“The local index closed the week in the red after attempting to head higher through the week. The market’s strength early in the week was likely driven by global investor optimism on renewed recovery and vaccine prospects. However, this strength eventually faded as prices hit resistances, and investors took profits following the gains over the past two weeks,” China Bank Securities Corp. Research Head Rastine Mackie D. Mercado said in an e-mail on Thursday.

“Foreign funds also notably turned weekly net buyers [last] week following several weeks of net foreign selling. It will be important to monitor if this net foreign buying is sustained through the following weeks as this may signal a possible inflection point in foreign fund flows,” Mr. Mercado said.

Meanwhile, Summit Securities president Harry G. Liu said the market’s movement will depend on the economic outlook, which he said would hinge on the government’s COVID-19 inoculation program.

“We’re still trying to develop a reversal on the total market. Basically, I think the important fundamental is [for] the vaccination to be successful in the coming months so that the economy can go back to improvement,” Mr. Liu said by phone on Saturday. “So, I feel for the meantime, the market will still go on in medium- to long-term consolidation,” he added.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in an e-mail that the arrival of the first batch of COVID-19 vaccines this month will be a major catalyst for the market.

“For the coming days or weeks, any further measures to reopen the economy would help support better economic recovery prospects as well as investment valuations,” Mr. Ricafort said.

Meanwhile, the result of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting last week might cause investors to pocket their recent gains. The BSP on Thursday kept benchmark interest rates at record lows to support the Philippine economy’s recovery from the coronavirus pandemic.

RCBC’s Mr. Ricafort placed the PSEi’s immediate resistance at the 7,100 level. Meanwhile, China Bank Securities’ Mr. Mercado sees the index moving between 6,900 and 7,130 this week.

“We expect the PSEi to trade sideways in the coming week as investors shift their focus to the government’s vaccine rollout. Moreover, we may see some reactive moves on Monday following the BSP’s policy meeting,” Mr. Mercado added. — K.G. Valmonte