PHILIPPINE shares are expected to continue their consolidation phase this week, trading around the 7,200-points range, before moving upward in a projected year-end push.
Michaelangelo Oyson, BPI Securities Corp. chief executive and managing director, told The Manila Times after a briefing on Friday that the local market is seen to trade within the 7,200 level this week amid uncertainties on global fund flows.
“I think the market is still going sideways this week. The same, at 7,200, because there’s uncertainty on the direction of the global flows,” Oyson said.
“So we’re asking investors to accumulate on weakness,” he added.
Despite the generally positive third quarter earnings, Oyson explained that the index is still moving sideways as the heavyweights like Philippine Long Distance Telephone Company (PLDT) and banking stocks recorded weak earnings during the first nine months of the year.
“It is a mixed set of results – PLDT accounts for 11 percent of the index. And we’ve seen lower price targets and earnings for PLDT on the back of lower margins because of the ongoing price war between PLDT and Globe [Telecom Inc.], as well as higher depreciation on higher capital expenditures (capex) just to keep up with capex to revenue of Globe,” Oyson said.
“Globe has been aggressively spending capex over the last few years and PLDT has lagged behind. That is a big chunk of the earnings. Also banks — the banks are very pedestrian when it comes to earnings as they have lower trading gains and soft margins,” the BPI chief said.
“If you look at the index, the big chunk is with the telcos and banks. The ones that are doing good are the consumer names that are small. The only one that’s big is URC [Universal Robina Corp.],” he added.
Meanwhile, BPI Asset Management said in its weekly market outlook that the Philippine Stock Exchange index (PSEi) is expected to trade between 7,066 and 7,330 this week amid a market consolidation.
“The market may test the all-time high again but that would depend on the performance of its regional peers. Key catalysts to watch out for would be overseas remittance in the local front and the PMI [Purchasing Managers index] figure in the US,” it added.
Jason Escartin, investment analyst at F. Yap Securities Inc., said in a weekly market review that the market is still seen to be volatile this week “as institutional players are on watch mode on crude futures’ trend, on top of geopolitical events.”
According to Escartin, events this week that may affect the market include: European Union (EU) member states’ sanctions against Russia over the Ukraine conflict; the state of the European economy; OPEC members’ directional call on crude supply ahead of their gathering on November 27; and the trading link between Hong Kong and Shanghai Exchange which starts Monday.
Escartin said that despite “dismal” third-quarter earnings of some heavyweight companies, investors are anticipating fourth-quarter results to improve toward the yuletide season in line with the positive fourth quarter prospects of some companies.
“The earnings push is still supported for several large caps, even as overall growth expectations could slow for 2015. The underlying strength relies heavily on firms’ effort to expand their business model, which will provide improved momentum for stronger recurring income base,” he said.
He said the sideways movement projection this week was generally because investors are still digesting the third quarter earnings data as well as companies’ expansion plans for the fourth quarter onwards to next year.
“Sessions might stay range-bound as participants heed for macro catalysts that could prod them to take on more aggressive positions,” Escartin said.
“Working within 2015’s prospects, however, dips should be taken as opportunity to buy to optimize portfolio returns. Immediate support is at 7,150 to 7,200 points while resistance is at 7,300 to 7,350 points,” he added.
On Friday, the main PSEi was up 18.71 points or 0.26 percent at 7,217.34, while the All Shares index rose 8.90 points or 0.21 percent to 4,245.96.