Market vulnerable to profit taking

Shares prices are expected to keep their sideways movement over the near-term period as the benchmark index struggles to stay above the 7,000-point level.

BDO Unibank Inc. chief investment strategist Jonathan Ravelas said the market remains fragile and susceptible to sell-offs.

This could be due to the continued concerns on the lingering impact of the pandemic and a spike in the inflation rate as these factors could both delay the recovery of the domestic economy.

Despite the higher January inflation rate, the Bangko Sentral ng Pilipinas last week kept key interest rates unchanged at 2 percent. Given the rising trend in inflation rate, analysts are not expecting the BSP to further reduce interest rates during the first half of the year.

“More earnings report are expected to trickle in the next few sessions and with macro events in the horizon, anticipate heightened volatility especially near close,” online brokerage firm 2TradeAsia.com said.

“In Chinese zodiac sign, the bull represents hard work and patience—key attributes that the market rewards in the long-run as long as bets have sound revenue models and meaningful expansion stories in the pipeline,” it added.

The Philippine Stock Exchange Index last week closed marginally lower on profit taking after the index traded higher during the first three days of the shortened trading week. The PSEi closed at 6,991, down 28 points from previous week’s close.

“The week’s close at 6,991.01 signals the current rally remain fragile and susceptible to sell-offs,” BDO Unibank Inc. chief investment strategist Jonathan Ravelas said.

Four of the six sectorial indices ended lower, led by industrial which declined 1.5 percent and property which dropped 1.3 percent.

But mining and oil rose by 3.4 percent while holding firms added 0.6 percent week-on-week.

The average daily value turnover improved to P12.36 billion, up 24 percent week-on-week even as foreign buyers turned net sellers. Domestic investors, however, continue to account for the bulk of weekly transactions.

Meanwhile, Wall Street stocks finished a solid week at all-time highs Friday amid anticipation of more US fiscal stimulus, while bitcoin slipped back from record highs to below $48,000.

After a positive day on European bourses, all three major US equity indices finished at all-time highs, with the S&P 500 gaining 0.5 percent to end up 1.2 percent for the overall week.

Markets in New York meandered through much of the week, but generally drifted higher following mostly good corporate earnings. Much of the economic data has been weaker, but investors view that dynamic as lending further momentum to President Joe Biden’s stimulus proposal.

“We can see that Biden wants to move forward with his package quickly,” said Gregori Volokhine, president of Meeschaert Financial Services. “We can also see more progress on coronavirus vaccines.”

“As the fate of the proposal remains on hold, critics and advocates are debating the merits of its size and composition,” Oxford Economics said. 

“President Biden, however, appears less willing to compromise on some key issues, indicating that the fiscal aid, which can be passed with a simple majority in the Senate via the budget reconciliation process, will be larger than expected even a few weeks ago.” With AFP