Optimism that corporations will announce higher profits and expectations that inflation rate further decelerated last January will push the Philippine Stock Exchange index (PSEI) to new highs.
Corporations are expected to start reporting on their full year profits this year. The Philippine Statistics Authority is scheduled to release the January inflation data on Thursday, February 5.
AB Capital Securities Inc. said in a weekly market outlook that the benchmark stock index is still bullish despite near touching the 7,700 technical target set mid-January.
The Bangko Sentral ng Pilipinas (BSP) said inflation is expected to “ease further to 1.8 percent to 2.7 percent on January amidst lower food and oil prices.”
Following December last year’s 2.7 percent inflation, the BSP is projecting headline inflation this year to range from 2 percent to 4 percent—lower than the 2014 target of 3 percent to 5 percent and actual 4.1 percent for full year 2014—due to declining oil prices, and more stable food prices due to adequate supply.
“Low inflation is generally bullish for equities as consumer spending increases and rate hikes will be delayed,” AB Capital said, noting the trading range for the week seen at 7,400 to 7,700 points.
Accord Capital Equities Corp. analyst Justino Calaycay Jr. said the “surprising 6.9 percent” GDP growth for the fourth quarter boosts expectations that corporate profits will be higher.
On Friday, the main PSEi rebounded to a record close. up 0.95 percent or 72.61 points to 7,689.91 while the All Shares Index also increased by 0.86 percent or 38.12 points to 4,465.28.
The Friday 7,689.91 close is the new all time high, and has beat the previous market record closing high of 7,661.18 on Wednesday last week.
Jason Escartin, investment analyst at F. Yap Securities Inc., said though technical breathers are in place to slightly affect the market, declines will be limited as foreign cash seize on dips” for position buying.
BPI Asset Management also said in its weekly market review that the PSEi may trade “range-bound between 7,600 to 7,800 as companies kick-off the earnings season
“Investors should watch out for several economic data coming from both domestic and overseas. Locally, inflation figures are expected to come out. In-house forecast is at 2.2 percent while consensus is at 2.3 percent. Both are at the lower end of the government’s target of 2 percent to 4 percent primarily due to lower food, electricity and fuel prices,” BPI said.