Bargain hunting to boost mart this week — analysts

Investors may find themselves trooping back to the local equities market to scout for bargain stocks, although analysts point out that a sustainable rally remains a big question mark at this time given concerns on high fuel prices, inflation and interest rates.

"The market is going to rebound again this week. We are in the midst of a snap back rally after the market’s steep drop over the past five weeks," AB Capital Securities research head Jovis Vistan said.

Last week, the Philippine Composite Index nudged 4.07 points or 0.22 percent to 1,868.13 as investors started bargain hunting to reposition on certain stocks.

Despite the oversold situation of the market, some investors may opt to stay on the sidelines because of the uncertainty over the final version of the Value-Added Tax Bill. President Arroyo has urged Congress to raise the value-added tax to 12 percent from 10 percent.

There has been a deadlock in Congress as the House of Representatives is pushing for an increase in the VAT to 12 percent while the Senate wants to keep the current VAT and is instead proposing to raise the corporate income tax to 35 percent from 32 percent and remove the VAT exemption on some key industries.

Both chambers of Congress are currently reconciling their versions through a bicameral conference and have committed to pass a law by the end of the month.

The new VAT bill is crucial as institutional investors would want to see the country’s risk premium decline before coming in strongly.

Last week, Japan’s credit rating agency downgraded the country’s currency long-term senior debts by a notch due to delays in the country’s fiscal reform.

For the first quarter of the year, the government incurred a budget deficit of P63.5 billion.

Although it was lower than the government’s target of P77.8 billion, it was still higher than last year’s P56.847 billion.

Vistan said revenue collections were disappointing as the Bureau of Internal Revenue (BIR) collected only P109.7 billion in the first quarter, below its target of P111.1 billion.

Despite missing on their revenue targets, the government is confident it will meet its full year target deficit of P177 billion to P180 billion.

Investment portal 2tradeasia.com said the budget deficit results, coupled by the BIR’s strong resolve to curb tax evasion will likely temper expectations for aggressive interest rate increases.

"Any move that maintains the present interest rate policy will help soothe consumers’ inflation-related anxieties, and alleviate in part rising business costs," 2tradeasia.com said.

2tradeasia.com said Chinese President Hu Jintao’s visit to the Philippines on April 26 could also bolster sentiment, in-step with Asian ministers’ move to foster deeper bilateral trade agreements within the region.

The peso’s recent appreciation vis-à-vis the greenback reinforces earlier predictions of improved funds flow in emerging markets like the Philippines.

"Technically, the medium term outlook should improve if the PHISIX moves back above the 1,880 level with conviction. The market’s short term oversold condition and long term bullish outlook could help provide the necessary push. However, sustainability remains doubtful because of the looming uncertainties. Market players are talking about rising prices, slowing economic growth, and slowing earnings growth," Vistan said.

Investors are also awaiting the release of first quarter earnings results of listed companies to allow them to assess the impact of high oil prices, rising inflation and interest rates.