Shares likely to consolidate this week, say analysts

By Zinnia B. Dela PeñaThe Philippine Star 01/02/2006

Despite the favorable macroeconomic and corporate outlook, share prices are expected to consolidate in the first week of the new year as investors await the direction of the market.

"The market may start the year 2006 on a consolidation mode. The lack of leads could result to a tentative first trading session. The Phisix is very close to its immediate resistance level of 2,100. There could be some profit taking despite much optimism for 2006," AB Capital Securities said.

The 30-company main composite index rose by 28.72 points or 1.39 percent at cloat at 2,096.04. It ended 2005 up 15 percent from a year ago level.

"The market is trading in a downward channel in the short term with support at 2015 and resistance 2109. The breakout from this pattern will provide a hint to the direction of the market," BPI Securities said.

BPI Securities said that if the market breaks 2,109, this would be bullish for the stock and provide a price target above 2,300. However, if it breaks the 2,015 to 2,000 support, this will mean a deeper correction, BPI Securities said.

"The Phisix needs to break the key resistance provided by the intrayear high of 2,172. A move above 2,172 will give a more bullish outlook for the market," BPI Securities said.

Accord Capital Securities Inc.’s Ron Rodrigo, however, expressed confidence that the stock market would be more vibrant this year in lieu of government’s hardline efforts to resolve its fiscal problem.

"Investors also believe the market is ripe for another big leap next year, given that the three-year average growth rate of the index is 27.6 percent. It will really depend on the performance of the economy and political stability in order to reach the desired levels," Rodrigo said.

The peso closed 6.1 percent higher than its level on the first trading day of January, and there is a strong possibility that the currency would continue to gain strength in 2006 given its good performance, according to Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr.

From 56.34 to a dollar last Jan. 3, the peso has now averaged at 53.062 to $1 Thursday, the last trading day of the year.

Tetangco said the appreciation of the peso and its low volatility make it the best performing currency in Asia and one of the best in the world.

Some investors are also anticipating a possible credit rating upgrade due to recent fiscal reforms.

Last month, the government finally implemented the long-delayed expanded value-added tax law, the most important revenue enhancing measure of President Gloria Macapagal Arroyo’s fiscal reform program.

This year, additional revenue of P80 billion is expected to be generated once the VAT rate is raised to 12 percent from 10 percent and the corporate income tax is lifted to 35 percent from 32 percent.

Blue chips dominated trading last trading day, led by Bank of the Philippine Islands, which rose 1.9 percent to P54.50, Philippine Long Distance Telephone Co., up 3.1 percent at P1,835, and Globe Telecom, up 2.1 percent to P735.

Second liner Paxys went up 6.7 percent to P6.40, on the call-center operator’s rosy growth prospects. The call center industry is by far the most successful business process outsourcing segment in the country.