PROFIT-TAKING could lead to a pullback for the stock market this week but a close in 6,800 territory should not be ruled out, analysts said.
The benchmark Philippine Stock Exchange index, which hit an intraday high of 6,829.97 last Friday, closed 2.16 higher week-on-week at 6,791.69. It had closed a year low of 6,158.48 on June 21.
Online brokerage firm 2TradeAsia.com said that the PSE's upward momentum was being boosted by expectation of rate cuts sometime in late third or fourth quarter this year and positive headlines regarding cooling inflation in relevant markets.
It added that the arrival of second-quarter earnings results, starting with BPI's 18-percent gain, would further drive the market.
"There should just be an awareness that the recent rocket power in global risk assets has been majorly fueled by lower policy rate expectations before year-end — accumulate gradually, caveat emptor (buyer beware)," 2TradeAsia said.
Philstocks Financial Inc. senior research analyst Japhet Tantiangco said that a build-up in momentum was likely.
"The local market has also gotten past the 6,700 level which was previously considered as a resistance," Tantiangco noted, stating that "its 50-day and 200-day exponential moving averages are about to form a golden cross."
A golden cross — where the short-term moving average rises above the long-term one — is seen as indicative of a bull market.
Still, Tantiangco said that traders could choose to take profits this week, driving down the market.
"At its current level, the local market is still deemed to be fundamentally undervalued. Hence, long-term investors may also take positions next week," he said.
"The short of it is that positive earnings plus central bank policy decisions in August should provide near-term propellants for local equities."
Tantiangco added that further peso gains against the dollar could also provide a further lift for the PSEi.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., meanwhile, said that "any sustained breach above 6,720 could potentially re-test the 6,800-7,000 levels, particularly the 7,070.72 high posted on April 2, 2024 or more than three months ago."
"The easing/improving trend in local interest rates/bond yields recently supported market sentiment as this could reduce the borrowing/financing cost of listed companies," he added.
The likelihood of an August rate cut amid easing inflation, to be supported by rice tariffs having been slashed to 15 percent from 35 percent, has been among the "peculiar positive catalysts for the local financial markets in recent days/weeks," Ricafort said.
Analysts said that this week's immediate support would be at 6,500 – 6,700, while resistance was seen at 7,000.
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