The country’s stock market is likely to weaken this week as investors’ risk-aversion is growing ahead of the national elections on May 9, and aggravated further by relatively more expensive valuations of domestic shares compared with regional counterparts, analysts said.
Jonathan Ravelas, market strategist at BDO Unibank Inc., said that the near-term bias in the market is on the downside due to renewed risk aversion as well as concerns over share valuations.
“The valuation [of shares]right now is somewhat expensive,” Ravelas said.
Thus for the week, the trading range will be from 7,160 to 7,350, the analyst said.
Last week, the benchmark Philippine Stock Exchange Index (PSEi) moved sideways, picking up just 0.03 percent to end at 7,247 week-on-week.
Gains were seen in the financial sector with a 1.66 percent advance, while the biggest loser was the mining and oil firms index, which shed 1.94 percent.
The services sector likewise incurred losses of 1.91 percent, mainly dragged by the fall in share prices of Philippine Long Distance Telephone Co. (TEL), and International Container Terminal Services Inc (ICT).
During the previous week, average value turnover fell by 20 percent to just P5.448 billion.
Foreign investors were net sellers last week at P325 million, with losers just outnumbering winners, 94 to 93.
Meanwhile, Victor Immanuel Felix, equity analyst at AB Capital Securities Inc. said that the local bourse is seen remaining “flat” during the week, ranging from 7,250 to 7,350.
“Foreign investors are becoming more risk averse as we are 30 days before the elections. They are puling out slowly as shown by the previous week’s trading where foreigners were net sellers for five consecutive days,” Felix said.
He noted that after the national elections, and assuming that the “right” candidate wins, money would start to flow back into the country again.
Felix also explained that the current price-earnings (PE) ratio is perceived to be relatively more expensive than our regional peers.
“We are slightly more expensive now with a PE ratio of 21-22. Historically when we are approaching the 22-level, there is going to be a correction to a more reasonable level of 18-20,” he said.