Saturday, 13 June 2009

Bourse ignores gloomy economic data

Kristine Jane R. Liu

Investors turned a blind eye to poor economic data this week, choosing instead to ride along with the stock market’s over-all optimism, analysts said.

The benchmark Philippine Stock Exchange index or PSEi gained 2.77% to close at 2,598.80 week-on-week, while the all-share index added 1.11% to end at 1,645.64.

Average value turnover however was lower, reaching only P2.92 billion a day compared with the P3.39 billion a day the previous week. Foreign buyers continued to dominate with P728 million in transactions, but also lower than the P917 million in transactions the previous week.

Losers swept gainers 91 to 61, while 36 stocks did not move.

"Optimists prevailed for most of the four-day trading session, prompting barometers to land on positive territory. Several investors defied bad economic reports, as well as political news related [to opposition to constitutional amendments]," said.

Among the bleak economic figures released this week was the 35.2% drop in exports for April, faster than the 30.8% decline the previous month. The government has also projected that the budget gap would likely reach P250 billion this year, wider than the P200 billion forecasted earlier. It likewise adjusted its economic growth target for the fourth time to just 0.8%-1.8% from 3.7%-4.7%.

The optimism investors showed during the four-day trading session could be attributed to an "undervalued" stock market and increased interest in emerging markets like the Philippines, DBP-Daiwa Securities, Inc. said.

"We were surprised at the recent continued upside of the market even with the dwindling domestic macro fundamentals. We thought there was some irrationality in the horizon ... [We conducted a study on select blue chips to represent the market] and our findings showed that most prices are still undervalued compared to the same period last year and even five years ago," it said.

"This explains why the market is behaving with exuberance despite a fragile domestic economy."

DBP-Daiwa Securities noted that the market’s monthly turnover has grown by an average of 14.8% since the year started. "In our view, investors are slowly coming into the market and have been buying whenever there’s opportunity ... liquidity is starting to pour into the equity market probably for positioning purposes especially in the emerging countries as these are seen to recover first compared with the developed countries," the brokerage said.

Maria Arlysa E. Narciso of AB Capital Securities Inc. however advised investors not to be too optimistic. "In contrast with bearish economic fundamentals, the market turned a blind eye to indications of economic slowdown and climbed continuously. With this current condition, we advise against holding on to stocks for a long time," she said.

Only two of the six subindices gained during the week.

The service sector, where telco giant Philippine Long Distance Telephone (PLDT) Co. belongs, closed the week 6.49% higher at 1,391.11, while industrial stocks, which include utility Manila Electric Co. (Meralco), gained 4.69% to end at 3,530.09 week-on-week.

The erstwhile darling of the market, the mining and oil sector, dipped by 3.07% to 5,989.06, while property shares shed 2.01% to end at 899.55.

Financial companies retreated by 1.62% to 589.54, while holding firms tumbled by 0.32% to 1,422.43.

Select blue chips, especially those belonging to the Lopez group, landed on the market’s top 30 gainers this week.

Meralco, which is partly owned by the Lopezes, surged by 12.4% week-on-week to touch a record high of P145 per share, while Pangilinan-led PLDT rose by 9.43% to P2,495. Both stocks were responsible for the market’s two-day gain on Wednesday and Thursday.

Meanwhile, Ayala-led Manila Water Co., Inc. added 10.71% to end at P15.50 apiece, while Lopez-led holding company First Philippine Holdings Corp. gained 6.56% to close at P32.50. Another Lopez holding company, Benpres Holdings Corp. went up by 5.71% to P2.22.

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