Market expected to sustain its gains on hopes of strong Q1 results

The market is expected to sustain its gains on expectations of strong first quarter results by a number of lead blue chip companies, analysts said.

Buoyed by the strong showing of US equity markets, the Phisix soared past the 1,500 resistance ceiling, and posted another record winning run for 2004 – six days of straight advances. The market last exhibited this feat in week four of October 2003, when it generated a 74-point rise.

Last week, the Philippine Composite Index closed at 1,516.81, up by another 26.76 points or 1.8 percent.

"The market’s strong performance could still continue in the coming sessions if foreign investors remain upbeat on the local stock market. Part of their optimism can be traced to the bullish sentiment in overseas markets, the low valuations of local stocks relative to other markets and low prices relative to the growth prospects of companies," RCBC Securities said.

The recovery expected for the US economy has been regarded auguring well for corporate earnings of companies in the equities market with analysts estimating a 20-percent growth in earnings.

RCBC Securities said there will be opportunities for re-entry as election-related issues crop up which may bring pull-back into the prices.

RCBC Securities said telecom stocks are forecasted to post strong earnings, owing to the sustained rise in their mobile subscribers, which should translate to higher prospective earnings.

"Historically, the market generally rises in the month of April, with the average during the last 11 years equivalent to 3.41 percent. But during the election years of 1992 and 1998, the market showed different performances although the average for the two years was still positive, equivalent to 5.19 percent. Seasonally, therefore, the upside potential for the market remains positive for the coming weeks," RCBC Securities said.

RCBC Securities, however, cautioned that the market may be due for a correction. "Like any other run-ups, there would be bouts of profit-taking that would occur especially if the main drivers of the market’s advance would reverse their trends, i.e., if foreign participants stop their buying activities or the peso once more depreciates beyond historical levels," the Yuchengco-led broker firm said.

BPI Securities said while investors may have discounted for now the security and political concerns, they will likely focus on these issues again in the next few weeks ahead of the presidential elections on May 10.

BPI Securities said the Phisix is poised to retest the 1,572 intraday high for the year. Support range is still at 1,500 while resistance is at 1,572.