Resurgent foreign buying perks up local stock mart

With the resurgence of foreign buying, trading sentiment in local stocks has turned upbeat although analysts remain skeptical of a sustained rally given the uncertainties still hounding the market, such as the widening budget deficit, the peso depreciation and concerns on the economic growth of the United States.

Last week, the composite index vaulted 41.20 points or 3.74 percent higher from a week earlier to end at 1,143.57, aided by the accumulation of select issues by foreign fund managers, bringing share prices up six times in the past eight trading sessions.

A website report by BPI Securities said foreign buying was prompted by expectations of a softening of interest rates given the strong likelihood that the US Federal Reserve will reduce rates in a bid to boost the flagging US economy.

"The move by the US central bank could mitigate pressures on domestic interest rates coming from the widening budget deficit. Consequently, issues in the property and banking sectors advanced; buying sentiment eventually spreading to the broader market," BPI Securities said.

It added that while the earnings report of most companies gave a mixed picture, it also provided indications of earnings stabilizing in select companies, leading investors to focus their bargain hunting activities on companies with stable earnings and strong balance sheet.

"If it holds above 1,130, the market has a good chance of testing the 1,170 to 1,200 resistance, the BPI Securities report predicted.

The reported pointed out that while the foreign accumulation reflected a vote of confidence in the Philippine market, such assurance remains unsteady since accumulation is hinged on a multitude of possible positive scenarios with no certainty of actualization.

"It cannot be denied that share prices are low, brought down to current levels by months of steady selling pressure. Second half profit results failed to spark any strong rally but investors seemed to have found enough reasons to support specific issues. We remain cautious given the many uncertainties but are not averse to select accumulation," BPI Securities noted.

For its part, F. Yap Securities, through its own portal 2TradeAsia.com, said while skeptics might still argue the quality as well as depth of value turnover supporting any ascent, it is also important to recognize brave pickers’ willingness to position gradually on weakness, specifically towards tradeable issues that have wallowed at attractive support areas.

"More have also been cognizant of declining yields on fixed income instruments, and that part of the financial system’s excess liquidity should eventually find its way towards equities, opt for stable large-caps backed by commendable business models that can well survive cyclical swings in the economy," it said.