Stock market on cautious trading

Philippine stock market investors would likely go for a bargain hunting on a cautious trading following Friday’s profit taking.

BPI Securities noted that the volume of trading increased by P813 million to P4.6 billion with the blocked sales from Philex Mining and PLDT.

Economic reports stunned the market following a7.95  growth in GDP for the second quarter of the year driven by the surged in construction, manufacturing, exports and investments.

The most active stocks were Banco de Oro, PLDT,  DMC, PNB, Megaworld, BPI, and SM. Declines outnumbered the gains 92 to 33 while 39 unchanged.

Week on week, the PSEi dropped 34 points or 0.98%. BPI says investors are awaiting for some catalysts that would trigger a bullish sentiment.

Analysts are watching the US economic indicators such as personal income, ISM manufacturing index, pending homes sales and employment situation.

Despite the strong economic data and the impressive earnings by companies, the local stock market is not assured of continued upward movement this week, according to analyst Prince Anthony Yeung of AB Capital Securities.

Yeung believes the direction the PSEi would most likely depend on the direction the DOW takes. Should the DOW stay and move further below 10,000 then the local stock market will follow suit.

“If this happens, stocks in the property sector are the most vulnerable to profit taking because they are the stocks that have moved the most upward recently.”

“However, since such a correction will be due to outside forces, it will be a buying opportunity since the fundamentals of the companies will not have changed.”

On the other hand, if the DOW manages to creep back and stay above 10,000 then it will allow the PSEi to run its natural uptrend due to the positive backdrop of the local economy, says Yeung.

“With the weakness of the latest economic data coming from the US, it seems more probable that the DOW will stay below 10,000 as caution will most likely be the prevailing mood.”

Support can be found at 3,530, but that can be broken if the DOW moves much further south of 10,000.

Yeung noted that average trading value last week was slightly above P4 billion. However, trading activity was trending lower.

“The strength of the local stock market on Monday was accompanied by one of the busiest trading days this year but trading activity, although still higher than the year to date average, slowed down towards the end of the week.”

Yeung says the backlash of the hostage incident on the market was largely a one day thing even if the event is still hogging the headlines.