Monday, 8 June 2009

Optimism to send Philippine stock prices higher this week


Investors’ new-found optimism is expected to continue driving trading although profit taking because of the shortened trading week might temper the rally, analysts said.

"The market is showing no signs of slowing down and seems to be heading for higher ground," AB Capital Securities, Inc. said.

"Perceptions of improving external fundamentals are seen as the main catalysts for investors’ new-found optimism."

The massive amount of liquidity that has remained uninvested, the brokerage said, will add fuel to the market’s continuous rally.

And with interest rates at their current lows — and which are seen to go down some more — AB Capital Securities said this has made local stocks even more attractive because of the higher yields they offer.

"Many investors and traders, who have been waiting for a correction, seem to have given up waiting. They have gone beyond technicals and are not afraid to [put their money in the stock market] despite the lack of a reasonable technical correction," it said.

The composite index last week posted a week-on-week gain of 6% or 139.37 points to 2,528.68.

Since the year started, the local market has gone up by 35.02% with almost all six subindices’ values up by almost half.

"A big chunk of money is coming from foreign fund managers, who are beginning to look at other countries that have stronger economic fundamentals," AB Capital Securities said.

They are said to be favoring emerging economies that are reporting better numbers compared to major economies. Since the month started, foreign investors have been net buyers with P880 million.

Despite the market heading higher, DBP-Daiwa Securities, Inc. said there might be occasional pullbacks due to the four-day trading week and the lack of market moving news.

"[The market’s recent surge might be impeded given the shortened trading week due to the celebration of Independence Day on Friday]," it said.

"Moreover, with lack of fresh leads, investors may opt to realize gains given that the main index has already reached overbought levels," DBP-Daiwa Securities said.

The only local economic data scheduled for release this week is exports for April. The National Statistics Office will release the data on Wednesday.

Analysts said they expect the figure to be better since it has shown indications of bottoming out. In March, it declined by 30.9%, down from 39.1% drop in February.

"In our view, investors will continue to focus on stocks with strong correlation with interest rates, especially property and banking sectors," DBP-Daiwa Securities said.

Property shares rose by 10.64% to 918 week-on-week, while financial shares rallied by 4.91% to 599.23 week-on-week.

AB Capital Securities, however, warned investors not to be overly optimistic and to take a break before engaging in excessive buying.

"Given the high valuation and the overbought state of the market, we recommend against buying aggressively at this point in time," it said.

"Market players should continue to play this rally by trading and not adopting a buy-and-hold strategy."

The market, AB Capital Securities said, would nevertheless try to break its next resistance at 2,780 while support remains at 2,350.

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