The stock market rebounded strongly on Monday, joining other Asian bourses as investors took heart from higher oil prices and positive expectations with regard to upcoming news, which for the Philippines includes the release of 2015 growth data later this week.
The benchmark Philippine Stock Exchange Index (PSEi) jumped by 3.64 percent or 226.03 points to close at 6,434.08, while the wider All Shares index gained 2.82 percent or 100.88 points to end the day at 3,678.80.
“The market recovered because of combined several factors such as recovery in oil prices, bargain hunting, and that some investors are positioning themselves ahead of the country’s economic performance data report,” said Alexander Tiu, analyst at AB Capital Securities Inc.
Tiu said many investors were optimistic about the country’s gross domestic product (GDP) growth for 2015, which made them more bullish about buying shares in the stock market.
“In the global perspective, on the other hand, investors are likewise awaiting the policy meeting of US Federal Reserve. Most of them expect a dovish stance,” he added.
The government is scheduled to release GDP data for the last quarter of 2015 on Thursday. The US Fed, meanwhile, will wrap up a two-day meeting on Jan. 27 (Thursday in Manila) and is expected to keep interest rates on hold after a December increase.
Jomar Lacson, head of research at Campos Lanuza & Co. Inc., attributed the market’s Monday to a correction following volatility since the start of the year.
“This is a part of the overall process of digesting all information, such as the recent recovery in Wall Street during Friday’s trading as well as the rebound on oil prices,” Lacson said.
There is a high probability of a follow-through but at a slower pace, he added.
Subindices were all in green on Monday, led by property that gained 5.47 percent. Total value turnover reached P6.67 billion, with winners outnumbering losers, 131 to 46, while 35 issues remained unchanged.
Vulnerable to volatility
April Lynn Tan, head of research at COL Financial Group, Inc, said the PSEi would remain vulnerable to global volatility.
“The abundance of challenges is making it difficult to fight contagion,” Tan said in a briefing.
She said that while the situation can now be considered as “buyer’s market,” investors should not be in a hurry to sell.
“Remember we are now at the buyer’s market phase so there is no need to panic. So long as they [investors]have money for long-term investment they need not hurry, especially so without assessing their risks,” Tan said.
Among the challenges noted were a weakening peso and how expected US Fed rate hikes would be implemented later this year.
Tan said that if a bear market occurs, the economy would remain supported by other factors.
“These include the strength of the BPO sector, the favorable impact of the weaker peso on consumer spending and the country’s favorable demographics,” she said.
“Although interest rates are on the way up, the increase is not expected to be significant given ample liquidity locally and the strength of our government’s finances,” Tan added.
Juan Barredo, the company’s head of technical research, defined bear markets as a downturn of 20 percent or more in multiple market indices over at least two-month period.
“We have seen the first two elements, but lack the two-month period to officially call in the bear wave,” Barredo said.