The Philippine stock market may see hefty gains this year due to the national elections but still faces substantial challenges, analysts said.
Harry Liu, president of Summit Securities, said the Philippine Stock Exchange index (PSEi) will have room for rallies in the “first six months of 2016” given election spending for the May polls.
The first 100 days of a new president, also represents a “honeymoon stage” that will likely boost the market, he added.
Roy Reyes, co-founder of Traders Apprentice Pilipinas, echoed this view, saying the PSEi could go past the 8,100 level during this period.
He was less optimistic about the start of the year, however, saying the market could drop to as low as 6,000 points.
If the elections turn out favorably, Liu said the market could test a resistance ceiling of 7,400 points. If broken, the next test would be 8,100, he added.
“We can hit the all time high levels after we hit 7,400, on or before the new president is elected. The market will have no signs of going down unless there will be sudden spike in interest rates or unless a crisis arises somewhere,” Liu said.
For the first six months of 2016, Liu said the market’s support levels would be at 6,600.
Asked if a gradual hike in US interest rates would lead to volatility, Lui said further indications of recovering US economy could end up boosting global markets.
Joylin F. Telagen of IB Gimenez Securities Inc. and Jason Bibit of Regina Capital Development Corp., meanwhile, forecast a positive start to the year.
“January has been a great month for equities since 2012 … Resistance is at 7,100,” Bibit noted.
Telagen, meanwhile, said: “For the first few days of 2016, the PSEi may still go around to the 7,000 mark.”
She added, however, that the gain may not be “as strongly positive … like the last few years.”
While the elections could provide a boost, Telagen said global concerns may also affect the market. While the US Fed may have embarked on a normalization policy other central banks are expected to continue easing, she noted.
“With the start of the US normalization, liquidity might taken out of emerging markets and move back to developed economies,” Telagen added.
A weakening in other areas of the local economy, meanwhile, could provide a damper on growth. Among these are a slowdown in OFW remittances, a continuous drop in foreign direct investments, weak exports, the impact of the El Nino weather phenomenon on the agriculture sector and a possible power crisis.
“[C]onsumer and infrastructure related stocks will likely benefit as the main growth drivers ahead of 2016 presidential election,” Telagen also said.
The market transitioned from an upswing in the first quarter of 2015 to a volatile rest of the year given global issues such as the Greek debt crisis, a slowing Chinese economy and uncertainties over a US interest rate hike.
It was in 2015, however, when the PSEi recorded an all time intraday high at 8,136.97 on April 7, also closing at all-time peak of 8,098.68.
The benchmark index closed the year at 6,952.08 on Tuesday, down 0.45 percent or 31.53 points from the previous day, with foreign selling capping the last two trading days of 2015. The wider All Shares index likewise dipped by 0.14 percent or 5.69 points to 3,990.47.
Trading for 2016 starts on Monday, January 4.