LOCAL stocks are expected to trade higher this week on continued optimism over the US Federal Reserve’s decision to keep interest rates near zero and as investors adjust their positions ahead of the third-quarter earnings season.
Jason Escartin of F. Yap Securities Inc. said that aside from the positive effect of the Fed decision on sentiment, investors will be seeking out stocks that promise higher returns on their portfolio, resulting in a “revisit” of companies’ capital expenditure rollout.
“Sans geopolitical developments, portfolio fund managers will continue to uphold scouting for investment avenues that will generate improved real rate of return on their portfolio,” Escartin said.
“Equities placement would still be preferred, given most listed companies’ move to expand their business model to support increased shareholder return. Selection strategies might center on dividend yield, combined with stocks that possess good capital appreciation and liquidity via ease of entry and exit,” he said.
“With the third quarter season coming to a close, market participants will revisit capex rollout, plus cash flows that will be utilized for progressive initiatives next year,” he added.
Escartin said that the expected long-term upward trend of the market will likely materialize, with the main index going toward 7,500 to 7,800 points due to strong business expansion strategies for next year.
“Other than the seasonal window-dressing quarter, expected trajectory towards 7,500 to 7,800 will be driven by solid business expansion strategies for 2015, which will help boost earnings per share (EPS) outlook,” he said.
The Philippine Stock Exchange index missed the opportunity to retest the 7,300 resistance on Friday as banks and the local markets were shut during the onslaught of tropical storm Mario (international name Fung-Wong).
Analysts were very optimistic that the market may have hit 7,300 points last Friday if normal trading had continued.
On Thursday, the main index rose 55.45 points or 0.77 percent to 7,287.29 as investors cheered the US Fed’s decision to keep interest rates on hold. The broader All Shares index also rose 26.26 points or 0.61 percent to 4,309.73.