External factors to remain as dampener for local bourse

Volatilities in the global market remains a normal thing for now due to the looming interest rate normalization in the US on one hand and the implementation of the additional stimulus program in the euro zone and in Japan on the other.

These factors, along with the low oil prices and the questions on the path of China’s economic growth among others, are the causes of movements in financial markets.

Last Friday, for the fourth day in a row, the shares index closed to a new record high above 7,800 as investors cheered the prospects for corporate earnings growth and a dovish Federal Reserve stance.

The barometer Philippine Stock Exchange index (PSEi) surged 21.94 points to 7,825.39 from Wednesday’s 7,803.45 close.

Markets were closed for the Chinese New Year holiday Thursday.

Friday’s record close is the 14th for the PSEi since the start of the year.

“Trading activity may be muted because of the Lunar New Year break in other countries but it has obviously not kept the index from gaining. We are pleased that alongside the record highs, we have seen the market’s daily average turnover almost double to P11.70 billion from the same period last year,” PSE president and chief executive officer Hans B. Sicat said.

Sicat expressed hope this level of activity will be sustained and even improve in the coming months.

”Prospects of good four-quarter results and Fed minutes a bit dovish helped push the index past 7,800 levels. (We) continue to see tests towards 8,000 levels,” said Jonathan Ravelas, Banco de Oro chief market strategist.

Counters were mixed, with the financials and mining and oil in negative territory.

The sub-indices of other sectors advanced moderately. Volume of transactions reached 4.11 billion shares valued at Php6.89 billion.

Advancers won decliners, 90 to 83, while 51 issues unchanged.

The day’s most active stocks were led by Universal Robina Corp., Federal Resources Investment Group Inc., Energy Development Corp., Ayala Land Inc. and D&L Industries Inc.

Strength of domestic economies have been put to test during the global economic crisis in the latter part of the last decade.

Some have succumb to economic depression, like those in the Eurozone as well as Japan while others have regained their footing like the emerging economies in Asia such as the Philippines.

With new factors in play, economists repeatedly said that economies with strong fundamentals will be less affected.

One of these economies is the Philippines.

After posting lower growth in the first three quarters of 2014, the domestic economy made a rebound and once again showed its resiliency in the last quarter of the year after churning in a 6.9 percent growth from quarter-ago’s 5.3 percent and year-ago’s 6.3 percent growth.

The growth acceleration was attributed to higher government spending last December as well as improved performance of the Industry sector mainly due to manufacturing and construction as well as strong private consumption.

For the whole of 2014, the growth of 6.1 percent, as measured by gross domestic product (GDP), is below the government’s 6.5-7.5 percent target but economists expect the revival of government spending this year to address the slack in 2014.

Among others, economists of ING are positive on the performance of Asian economies but admit that hiccups are not out of the question.

For one, ING Bank Manila senior economist Joey Cuyegkeng said economic fundamentals will be one of the cushions against negative external shocks.

He stressed that “Asia is still a growth region despite some slowdown.”

For the Philippines in particular, Cuyegkeng said the effects of the sustained improvement of the country’s macrofundamentals will continue to spill until the next few years, thus, there is a need to further improve these for long-term effect.

”For the economy to grow at trend growth of above six percent, infrastructure projects should be pushed as well as power (projects),” he said during the ING-sponsored economic briefing Friday.

Cuyegkeng forecasts a recovery of domestic expansion this year and the next at 6.7 percent and seven percent, respectively.

The government’s growth target for this and next year is a range between seven to eight percent.

Cuyegkeng said impact to growth and on inflation of the projected power crisis in the summer of this year is seen to be “muted.”

”The productive areas in Luzon would be significantly spared from the looming power crisis but not the rural areas. However, the government’s ILP (Interruptible Load Program) is already in place,” he added.