Friday , 29 March 2024
The Philippine Stock Exchange in Makati City. (TMM file photo)

Stock index seen to breach 8,000

Share prices rallied above the 7,800-mark amid raised optimism in the business sector after the oath taking of President Rodrigo Duterte and prospects that the United States (US) interest rate hike will be deferred until next year.

The Philippine Stock Exchange index (PSEi) advanced 34.10 points to 7,830.35 last Friday from previous day’s 7,796.25 finish.

”Investors are now expecting that the U.S. will hold interest rates steady in the near- and medium-term following the strong volatility post-Brexit (British exit),” said stock brokerage AB Capital Securities Inc. in a market report.

It expects the PSEi ranging between the 7,700 and 8,000 levels next week and possibly re-test of the 8,000 level.

”Investors will likely look for cues and development this July following the formal inauguration of President Duterte. Among the new president’s platform – reducing crime and cutting red tape to speed up infrastructure projects,” it added.

Stock brokerage firm AB Capital Securities Inc. expects the PSEi to regain its all-time high of 8,100-level by year-end and 8,500 to 8,700 by 2017 mainly on the back of foreign investments.

It said the overall impact of the British exit ‘Brexit’ vote on the Philippine market is “limited.”

Recently “we had P8 billion in net foreign buying. If this continues, it’s just natural that the market keeps going up despite the fundamental value, which for us is just 7,500 to 7,600,” said Alexander Adrian Tiu, senior equity analyst at AB Capital said.

Tiu said also important for the index regaining the 8,100-mark is the implementation by the new Duterte economic team of their commitments.

“They outlined some of their policies, these have brought in foreign investments. A lot of foreign investors have been bullish because of this. It is one thing to outline a policy and another thing to follow it through. So there is a lot of execution risk especially in the second and third quarter,” he explained.

Tiu projects the PSEi further rallying around 8,500 to 8,700 next year.

“My basis there is I think we can grow by 10 to 15 percent basically that’s based on earnings growth and that assumes that the Duterte administration pushes through with all of its socio-economic policies,” he said.

However, Tiu noted that the local index is comparatively more expensive than other indices considering the country’s high economic growth rate and other positive domestic factors.

“And the foreign investors are seeing good things in the Duterte administration. He has outlined really good economic policies and I think people are expecting the red tape to lessen so that’s definitely a plus,” he said.

Further, Tiu downplayed the impact of last week’s British referendum result on the Philippine market.

“I think the cause of concern is if this spreads to the EU (European Union), then it’s going to be a problem because EU is a bigger group than just the UK (United Kingdom). If it’s isolated in the UK alone, then there should be no problem,” he said.

Meanwhile, AB Capital Securities is bullish this year on banking, consumer and property sectors.

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