Stocks seen to consolidate after sharp price correction

 

 

By EDU H. LOPEZ

Share prices are likely to consolidate after a sharp correction on Friday as expected by investors and fund managers.

"The market finally corrected, falling a staggering 112 points as profit taking overwhelmed the market.," says BPI Securities.

Trading opened weak and never improved. BPI Securities was expecting that the market correction was inevitable and that the degree of the decline was also not surprising given the steepness of the market’s incline in recent trade.

BPI added that Thursday’s trading had already hinted at a market pullback.

Some bargain hunting may be evident given the depths of Friday’s decline, however, any sustainable uptrend may require basebuilding at a lower index level.

With most of the blue chip issues prone to a correction and likely to remain flattish after reaching all time highs, expect second and third-line issues to hug the limelight, says analyst Erwin Balita of AB Capital Securities.

"Already we’ve seen rotational buying into smaller cap issues that have potential after the market consolidated," he added.

Benpres Holdings Corp. (BPC) has underperformed during the market’s run up and is likely to catch up given Meralco’s surge above P60 per share.

BPC has indirect ownership thru FPH. Balita noted a heavy selling order from a foreign broker since three weeks ago and also has capped its performance and may reverse once supply has run out.

Filinvest Devt. Corp. (FDC) has been stable the past 2 weeks and movement will likely be triggered depending on FLI’s (67 percent subsidiary) listing come Feb. 6. "From what we gathered FLI’s follow on offering abroad received a very good take up," says Balita.

Among the third liners, Geograce Resources (GEO) and Picop Resources (PCP) remained active last week.

GEO disclosed that it has signed a share-for property-swap agreement with Saprolite Mining Inc. for the latter’s mining interest in its 5,503 hectares nickel property in Zambales.

PCP also established a new 52-week high on persistent speculations of a backdoor listing of prospective mining companies.

Balita also noted that last Friday’113-point correction finally ended the market’s one-week streak that brought it seven points shy of 3,300. Share prices finally succumbed to a much-needed break after extending to overheated levels based on technical indicators.

On Thursday’s peak of 3,293, the PSEi registered an 11 percent gain year to date. On a positive note, the correction was most welcome for us as it was attributed not to negative developments but merely to the Dow’s 119-point drop last Thursday.

Bangko Sentral’s decision to leave interest rates unchanged was also a welcome move, as an interest rate cut would’ve been just neutralized by the anticipated correction.

http://www.mb.com.ph/BSNS2007012985795.html