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Stocks likely to drop ahead of earnings reports

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PHOTO BY SANTIAGO JOSE J. ARNAIZ

By Arra B. Francia, Reporter

STOCKS are seen to trek lower in the week ahead, as investors wait for the release of more earnings reports for the first quarter.

The bellwether Philippine Stock Exchange index climbed 1.36% or 103.60 points to close at 7,721.02 last Friday, gaining momentum after S&P Global Ratings raised its outlook for the Philippine economy to positive from stable.

Week on week, the market ended with a minimal decrease of five points or 0.07%, as the 2.4% decline in financials and 1.9% decrease in services tempered the increase in holding firms and property, which added 1.6% and 0.6%, respectively.

Foreign investors remained outside the market, as net foreign selling stood at P2.52 billion last week, 45% lower on a weekly basis.

“Tug of war between buyers and sellers became the week’s highlight, as several funds exited from US equities after their 10-year treasury bond yield surged to as much as 3.035%. Such was doused off later in the week, as buying resumed on improved Q1 earnings,” online brokerage firm 2TradeAsia.com said in a weekly market note.

This week, analysts flagged another possible decline for the market in lieu of quarterly earnings reports.

“The potential softening might come from Q1 results, with select listed stocks slated to present this week,” according to 2TradeAsia.com.

Set to release their financial reports this week are Manila Electric Co., Metro Pacific Investments Corp., D&L Industries, Inc., Aboitiz Equity Ventures, Inc., and Eagle Cement Corp.

Eagle Equities, Inc. Research Head Christopher John Mangun noted the same, adding that investors may wait for the index to hit the next support level.

“I think we will continue to see a weaker market as investors continue to wait on the sidelines for a bottom in the index. With only four trading days next week, I am expecting a lower turnover value,” Mr. Mangun said.

Overseas, traders may look at the US Federal Reserve Open Market Committee’s meeting on May 1 and 2, which may hint toward policy tightening.

“The spotlight could switch to the US government’s fiscal deficit, especially with the latest corporate income tax cut and planned government spending this year,” 2TradeAsia.com said in its market report.

Eagle Equities’ Mr. Mangun placed the market’s support level from 7,500 to 7,600, while resistance will be at 7,750 to 7,880. The analyst added that he remains optimistic for a reversal of trend before the end of the second quarter.

“In the meantime, small and mid-cap companies will continue to see higher trading volume as they have proven to be better opportunities to make money in the stock market right now,” Mr. Mangun said.

Financial markets will be closed on May 1 for Labor Day.