PH SHARES WEEKLY OUTLOOK

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To trend higher on MSCI lead, upbeat sentiment
Local shares are expected to trend upward this week as fund managers and other market players adjust their portfolios ahead of the MSCI rebalancing which takes effect on September 1, and with sentiment still upbeat following the market’s consecutive gains last week.

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Some analysts believe there is strong confidence in the equities market right now and that the Philippine Stock Exchange index (PSEi) may exceed expectations again just like the previous week when the index went beyond the 7,100 territory despite forecasts of a medium term consolidation.

“We expect the local equities market to trade between 7,100 and 7,250 in the upcoming shortened week, with an upward bias ahead of the MSCI rebalancing. Moreover, economic data from the US and on the local front would also drive market sentiment,” BPI Asset Management said.

BPI noted that a number of local and economic data are anticipated to move the markets this week. On the home front, the second-quarter GDP result is due for release on Thursday while in the US market, upcoming data releases include new home sales, Markit’s Composite Purchasing Managers’ Index (PMI), personal consumption and expenditure (PCE) and personal Income data.

“Furthermore, corporate earnings results turned out to be mostly in-line with expectations, which reaffirm the strong outlook for 2015,” BPI added.

Justino Calaycay Jr., equity analyst at Accord Capital Equities Corp., said trading this week “will discount anticipations over second quarter GDP. We expect the number to be an improvement over first quarter’s 5.7 percent and should be sufficient to support the government’s insistence on sticking to the official growth targets of between 6.5 to 7.5 percent.”

“This will be the turning point on whether the PSEi can sustain its advance towards 7,200 or serve as the platform for a near-term correction,” he added.

Alexander Adrian Tiu of AB Capital Securities Inc. said in a weekly market outlook that trading is expected to “normalize” this week as the effect of the earnings season fades.

“We expect the local bourse to normalize in the coming weeks as the earning season effect wanes,” he said. He added that a catalyst for this week “is the release of Philippine Q2 GDP growth results on Thursday.”

“On a technical basis, the index recently broke out from its resistance at 7,000 points, with near-term upside at 7,200. Despite the bullish optimism in the short-term, we express caution on a possible pullback near the 7,000 support level if it fails to breach the aforementioned resistance. Given this, investors are advised to prudently take profits and cautiously accumulate at more bargain prices,” Tiu added.

The PSEi bagged straight victories last week, posting consecutive increases in a row and ending with an all-time high this year to close at 7,133.09 after hitting an intraday high of 7,141.17.

Jason Escartin of F. Yap Securities Inc. said the traded value of the PSEi averaged at P9.4 billion last week, which is an 8.4 percent growth week-on-week, and net foreign buying averaged P1.055 billion, despite the effects of the so-called “Ghost Month” in August. The Chinese consider the “Ghost Month”, which this year falls on July 27-August 24, an unlucky period to start a business or engage in a new investment.

The good performance of the market last week was not just attributed to positive US markets and local corporate earnings results, but also the earnings growth targets of companies next year.

“We laud the improved turnover for the local bourse during the Ghost Month, especially indications of net foreign buying. Several are aiming for earnings growth angle for 2015, apart from positive corporate news that are expected for the remainder this year,” Escartin said.

“Revisit stocks likely to further surprise expectations, especially towards fourth quarter. It might be prudent to work within a tradable range by positioning on dips and locking-in gains on the plus side. Immediate support is 7,000 to 7,020, and resistance is 7,200 to 7,300,” he added.

On Friday, the benchmark stock index rose 36.60 points or 0.52 percent to close at 7,133.09, while the wider All Shares index closed up 17.06 points or 0.41 percent at 4,217.55.

This was the fourth time that the PSEi reached an all-time high this year, topping the 7,096.49 close on Wednesday, August 20.

Market trading is suspended Monday, August 25, for the celebration of National Heroes Day. Trading will resume on Tuesday, August 26.

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