Market expected to sustain gains due to traditionally strong year-end buying

The market is expected to sustain its gains, owing to traditionally strong year-end buying, analysts said.

In its weekly market outlook report, BPI Securities said it sees the market testing its high for the year at 1,435.

Last week, the main composite index closed higher by 37.95 points or 2.82 percent week-on-week to 1,383.32. The market’s rise was led by Philippine Long Distance Telephone Co. (PLDT) which gained P20 to P880 on expectations of significantly higher earnings next year.

Other major index gainers last week were Bank of the Philippine Islands, Ayala Land Inc., Metro Pacific Corp. and Metrobank Trust & Co.

The official proclamation of Fernando Poe Jr. as the united opposition’s candidate, the resignation of Department of Trade Industry Secretary Manuel Roxas II, and the weakness of the peso dampened the bargain hunting mood which ensued following the market’s breach of 1,350 late last week.

RCBC Securities, for its part, said while political uncertainties are expected to cap any strong market upmove in the near term, this could be countered by the seasonal run-up that the market generally exhibits during the month of December.

Over the last nine years, the market has risen by an average of three percent month-on-month during December and even during the past two presidential election seasons of 1992 and 1998, the market managed to post an average gain of 5.5 percent during the month.

"Investors are also gradually digesting the recent political developments and while the market generally retreats when adverse political events occur, it bounces back in the next few sessions, suggesting that market players are just taking advantage of these occurrences to purchase select blue chips," RCBC Securities said.

AB Capital research head Jovis Vistan, on the other hand, expects the market to trade sideways this week due to the dearth of positive leads. He expects trading activity to become less active as the Christmas holidays draw closer.

Vistan said trading was fairly rangebound for most of last week as investors continued to search for direction and wait for more developments on the political front.

According to Vistan, economic and corporate fundamentals will play an important role in determining where stock prices will head next. "We need to sustain the improvement in fundamentals, keep interest rates and inflation low and achieve solid earnings growth next year. Market players are already anticipating higher corporate earnings next year, but they are not so certain about the macro outlook due to domestic politics and the expected rise in interest rates. For now, investors should look to preserve some of their profits for the year. Lock in gains and look to rotate towards safe bets in defensive sectors," Vistan said.

RCBC Securities said movements in international bourses and the peso would continue to guide the local bourse. Recently, the peso has been appreciating due to the absence of corporate dollar demand and the higher levels of remittances sent by overseas Filipino workers to the country.