After the first trading week of 2013 resulted in record-breaking performances, the domestic stock market’s mood for the upcoming days will still be more likely positive, and driven by a mixture of local- and global-driven sentiment.

Freya Natividad, analyst at 2TradeAsia.com, said that the market’s pace may rely on the details on US fiscal challenge, which involves implementation on the US government’s fiscal deficit reduction plan, as well as statements from the Federal Open Market Committee (FOMC), plus the low borrowing cost regime in the Philippines.

“Implementation revolving on the US government’s fiscal deficit reduction plan as well as statements from the FOMC will be highlighted, alongside release of other economic gauges,” she said.

“Thus far, institutional players are well aware this fiscal exercise would be a long and gradual process, and is expected to push more funds towards higher-yielding markets at least within the initial semester of 2013,” Natividad added.

She took note of the low borrowing cost that may create a high impact on the market in the next few days.

“Investors have also witnessed consistency in net foreign buying for Philippine-listed shares, as multilateral agencies are anticipated to reaffirm expectations for potential credit rating upgrade this year. With inflation likely to stay subdued, there is high probability the present low borrowing cost regime will be supported,” the analyst explained.

Natividad also said that chartists might review the Philippine Stock Exchange index’s (PSEi) current trajectory as bets are made on the market’s upside.

“In case momentum is maintained and barring unexpected negative surprises, the PSEi might test 6,500 [points] over the near-term. Bulk of the boost will come from improved government and corporate expenditure, which would help consumer spend. Seize on pauses to gradually position,” she specified. Jun Calaycay, analyst at Accord Capital Equities Corp., on the other hand, said that the outlook for domestic economy remains “rosy,” and that the increase in consumer spending may more likely depend on the upcoming May elections.

“The litmus test for the economy comes this first quarter—if it can outpace the 6.3 percent [economic growth] pace posted in the same quarter last year. Government spending remains the main issue to growth. In Aquino’s first two years at the helm, the economy has managed to grow despite not having made full use of budgetary allocations and the rather tepid take-off of its centerpiece economic program, the private-public partnership scheme covering mostly infrastructure projects, including big-ticket transportation projects,” he said.

Election spending
Calaycay also mentioned that it is widely hoped that the road leading to the May elections will benefit the economy, with an anticipated rise in consumer spending.

“We should see household purchasing power pick up as people find temporary incomes from election-related jobs. This, however, may be tempered in no small way by the continuing rise in the peso, which to date has dropped to the P40:$1 levels. Its twin effects of squeezing exporters’ margins and depressing OFW [overseas Filipino workers] real incomes provide a balancing force to the earlier cited expectation,” he said.

Last week, the PSEi gained 158 points to close at 5,971 (+2.73 percent week-on-week), supported by holdings (+3.24 percent), and mining and oil (+3.24 percent) sectors.

Average turnover was P5.83 billion as gainers beat losers, 116-53, while net foreign buying was at P752 million.

“In the process, the main share index posted its third record close in as many days this year and the 42nd dating back to last year. It gained 2.7 percent over the shortened first week, closing at 5,971.45, leaving little doubt the 6,000-mark will be breached sooner than later,” Calaycay said.

Immediate support for this week is 5,930 to 5,950 and resistance at 6,000 to 6,100.