MANILA, April 26, 2004 (STAR) By Zinnia B. Dela Peña - With the strong gains registered last week and the market technically overbought, investors may opt to take profits and wait for the outcome of the May 10 national elections, analysts said.

Last week, the composite index closed up 91.29 points or 6.1 percent to 1,589.4, its highest close since March 8, 2001 when it hit 1,589.57 points.

The upbeat sentiment comes on the back of expectations of good first quarter corporate results and other positive developments the past few days – the recent decision of the California Public Employees Retirement System (CalPERS ) board to retain the Philippines in its list of "permissible emerging markets" along with India and Peru, and the last election survey by Pulse Asia which places President Arroyo on the lead overtaking actor Fernando Poe Jr..

"Technically, the market is overbought and it may be susceptible to profit-taking which suggests a volatile market ahead," BPI Securities said.

Stock investment portal said: "Traders might find reasons to seize the mart’s recent strength and pocket gains, as barometers move closer to the 1,550 psychological resistance mark. However, these technical breathers are likely to be viewed as healthy pauses until the Phisix settles at a more comfortable base."

BPI Securities, however, said some bargain hunters may take advantage of market volatility to accumulate select stocks with good earnings prospect for the year.

RCBC Securities, for its part, said the market’s trek to higher levels "would be tempered by investors’ cautiousness considering that there are a number of short-term concerns to reckon with such as clamor for transport and wage adjustments after the series of oil price hikes and unfavorable developments related to the elections ahead of the May 10 elections."

BPI Securities said the market is expected to test the 1,600 psychological resistance. "This is positive since the market has established a new high for the year. The neckline of the double bottom pattern (May 2001 to Dec. 2003) is intact at 1,485 and this suggests a bottom for the market," BPI Securities said.

AB Capital Securities research head Jovis Vistan, on the other hand, expects investor sentiment to remain positive this week as improvements in earnings and an easing of fears over politics will encourage investors to return to the stock market.

"We believe that the risk now is that of being left out by a speeding train. In the coming weeks, we will be in the midst of first-quarter earnings reporting. Companies have boosted their 2004 earnings forecasts, fueling optimism profit will increase enough this year to warrant further gains in share prices," Vistan said.

Among the companies that are expected to report strong results are Philippine Long Distance Telephone Co., San Miguel Corp., Jollibee Foods Corp. and Petron Corp., Vistan said.

Leading the most actively traded issues last week was First Philippine Holdings Corp. (FPH) which rose by P2 to 8.3 percent to P26/share. Of the P98-million volume traded of FPH, P75 million was net foreign buying. FPH registered a hefty growth on its income for 2003 at P3.8 billion from 2002’s P1.9 billion.

RCBC estimates that the company will register an income growth of 21 percent to P4.6 billion in the current year. PLDT was the second most actively traded stock rising by P15/share to P1,075 as it announced that its subsidiary Smart Communications Inc. has been requested to push back the deadline to Piltel creditors on its debt swap offer.

The offer would entail that Piltel’s debt be exchanged for cash, Smart debt or sovereign bonds. This is considered as a prelude to a possible merger of the two mobile phone companies and possible backdoor listing of Smart which would on overall mean higher income for PLDT.

Reported by: Sol Jose Vanzi

All rights reserved