Local stocks are expected to pull back further this week as investors continue to rack up recent gains as they prepare for the possibility of the United States raising interest rates earlier than previously projected.
Last week, the Philippine Stock Exchange index (PSEi) lost a total of 56.41 points or 0.8 percent to close Friday’s trading at 6,851.38.
“The PSEi is likely to continue to decline in the next week. The profit-taking actions are really justified given the index’s 13 percent rally in the last three weeks, ”said Ron Acoba, chief investment strategist at commercial research provider Trading Edge Consultancy.
Acoba added that a sentiment of risk aversion could prevail after the aggressive tone of the Federal Reserve of the United States (Fed), which dragged the S&P 500 index by 1.31 percent on Friday.
According to the Fed’s most recent dot chart, two 0.25 percentage rate hikes can be sanctioned beginning in 2023 amid faster US economic growth and inflation.
“Nonetheless, we believe that the index may eventually reach its 2021 peak of 7,300 to 7,400, as a large number of stocks in the index are already preparing to switch from their respective bases,” Acoba said.
Jonathan Ravelas, chief strategist at BDO Unibank, said last week’s close at 6,851.38 implied there was a short-term peak at the week’s high of 7,001.21.
“Please continue to expect the market to swing between the 6,700 to 7,000 levels in the near term,” Ravelas said. “However, a sustained drop below 6,700 levels could indicate that the market could retry the 6,300-6,500 levels and reactivate the bears.”
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