Stocks seen to resume winning ways this week

MANILA, Philippines - Local stocks may continue their winning ways  this week amid upbeat reports on the US economy and consumer confidence as well as hopes that the US is making progress in the discussions over the budget to prevent its economy from going into a tailspin.

The Philippine Stock Exchange index reached multiple highs last week to close 1.6 percent or 88 points higher at 5,640.45 as investors loaded up on stocks in the financial services, property, and holdings sectors and a rosy local economy.

 “The local market is expected to ride on November’s record-setting momentum as December trades roll in. Investors return from an extended weekend break still digesting a surprisingly strong third quarter GDP that beat the most optimistic of estimates. Not even the elevated valuations have scared off equity buyers whose worst case scenario is a much-awaited and welcomed correction – if only to open doors for further beefing up the portfolio ahead of an anticipated year-end rush,” said Accord Capital Equities Inc.’s Jun Calaycay.

Calaycay noted that in the last 10 years to 2011, December trades gave an average return of two percent.

“It posted gains in 6/10 times averaging 9.8 percent while December losses occurred in 4/10 with a mean negative return of 2.1 percent. Based on these numbers, and given the overriding optimism, a conservative estimate puts the index at 5,750 and an optimistic ‘fighting’ target of 6,150. The averages point to a worst-case scenario of 5,520,” Calaycay said.

Calaycay said the PSEi needs to break past the 5,650-line to restore the primary uptrend.

He, however, warned that the market’s direction might also be affected by Europe’s protracted search for a viable and lasting solution to its debt problem.

“No matter how bullish the outlook may be at the domestic front, we cannot ignore volatilities in equity prices across two major continents,” Calaycay said.

“Fears that Germany will fall into a recession will send another round of fear to play into investing decisions moving forward. A recession will not only send economic and financial tremors across the continent but will pose a burden for Chancellor Angela Merkel as she seeks a third term in next year’s elections. Germany has provided for Europe what China gave to Asia and the rest of the world through the 2008 crisis – a steady demand,” Calaycay said.