Stockmarket bias likely to remain negative, say analysts

Trading at the stockmarket will remain within a tight range as investors await the outcome of the impeachment complaint filed by lawmakers against Supreme Court Justice Hilario Davide Jr. and other political developments.

Analysts said market sentiment may be negative with the resumption of session in Congress today where lawmakers are expected to formally decide on the impeachment complaint against Davide.

In its weekly online market report, stockportal Philstocks.net said: "The market’s bias may remain negative in the near term. There should be a healthy correction, considering that we went up so much since the middle of the year. The market needs to consolidate its gains and build a solid base before it attempts to go up again. The market is tired and it is likely that the majority of gains are behind us at least in the near term."

Philstocks.net said stocks are no longer cheap relative to 2003 earnings and that the market is selling for 16 times this year’s expected earnings. This is higher than the region’s average of 15.2 times.

BPI Securities, on the other hand, said investors would like the market to consolidate first before taking new positions in the market.

The market is likely to consolidate near the 1,400-point range (1,386 to 1,410) after making a 101-point run-up in October. The immediate up trendline (from Aug. 29, 2003 to present), however, is intact with the trendline support at 1,375.

Philstocks.net said that with the third quarter earnings season drawing to a close, investors’ attention will be firmly fixed on the elections and the economy.

"On the long run, we will continue to see increased confidence tied to good reports on the economy and earnings combined with very low interest rates. Stocks have been making new highs on expectations that accelerating growth globally will boost corporate earnings in the region," Philstocks.net said.

Among the prominent names that reported strong performances in the third quarter was Philippine Long Distance Telephone Co. (TEL). Without non-recurring charges, PLDT said its net profit during the nine-month period reached P11.30 billion, 140 percent higher than the year-earlier period. PLDT earlier projected a full year profit of P10.0-P12.0 billion.

Last week, the Phisix closed at 1,413.11, up by 14.04 points or one percent week-on-week. For the year, the market has surged by 394.70 points or 38.8 thus far. Despite reaching new highs, stocks had been moving up with caution. Buying had been very selective as breadth was mixed throughout the week.

Regional and the US market has influenced local investors with the strong positive sentiment on expectations of a good third quarter showing and prognosis that interest rates will not be raised for the rest of the year and early next year.

Major index gainers included Music Corp., Ayala Corp., PLDT, Metro Pacific Corp., SM Prime Holdings, Philippine National Bank, Ginebra San Miguel, ICTSI, and JG Summit while Benpres Holdings, Belle, Jollibee, Digitel, Equitable Bank, DMCI, ABS-CBN, Filinvest Land, Megaworld, BPI, Ayala Land, MetroBank, San Miguel A and Ionics fell.

RCBC Securities said the political scenario offers some fragility for the market despite strong economic numbers. "We have still to watch out for the emergence of an opposition candidate who will rival President Arroyo’s bid for the presidency in the 2004 elections," the broker firm said.