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MANILA - Philippine share prices may likely move sideways once again as investors weigh local catalysts, global growth concerns and the re-emergence of worries over a deepening debt crisis in Europe.
After a three-point loss last week, trading may likely be kept within the 5,200 to 5,300 band because of thin volumes and mid-level momentum indicators, said Gregg Adrian Ilag of AB Capital Securities Inc.
"Dips below 5,200 may not be strong enough to warrant deeper corrections, as the moving averages are near 5,100," Ilag said.
For the week, the local market will seek direction from President Benigno Aquino III's State of the Nation Address, the Bangko Sentral ng Pilipinas' policy stance and the first tranche of local corporate earnings.
President Aquino will deliver his third SONA on Monday, with investors closely awaiting his administration's concrete economic agenda to help sustain the Philippine’s growth momentum.
"Specifically, watchers might heed for indicative sequels to government’s thrust to pump-prime the economy via their public-private partnership initiative, and hasten investment and employment," said Freya Natividad, investment analyst at 2TradeAsia.com.
The Monetary Board is seen to keep key policy rates at current levels in a meeting on Thursday since tweaking the rates is "not necessary” because of the country’s strong economic performance, Ilag said.
After hitting a fresh record high at the start of the month and even with the previous week’s consolidation, current valuations remain unattractive as majority of stocks appear fairly valued.
"The index's current levels are not attractive to chase in terms of risk and return. However, corporate earnings in the second quarter will be able to ease valuations as well as encourage sentiment," Ilag said.
Overseas, Europe is once again re-emerging as a cause of concern as more signs of financial stress in Spain continue to rattle investor sentiment. The euro bloc's fourth-largest economy expects it would stay in recession until 2013 and Valencia, one of its regions, asked for a bailout.
Wall Street's sharp losses on Friday will provide a bleak backdrop for the local market at the beginning of the week's trades after the Dow Jones industrial average shed 120.79 points or 0.93 percent, to 12,822.57.
"Expect occasional breathers to ensue, as sentiment might glide with overseas trends, especially when widely-monitored economic gauges disappoint," said Natividad.
"In order for traders to regain confidence in the PSEi, we need to see it break the resistance from the all-time high at 5,232 and continue going upward to retest 5,403. If it doesn’t do that but it doesn’t fall further, then we should expect more sideways action for the coming weeks," said Absolute Traders & Consulting Services Inc.
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