Market to continue rising this week - analyst

MANILA, Philippines - The local stock market may continue to climb this week as the US economy’s momentum rises.

Local stocks have been in an uptrend for two consecutive weeks now, closing 66.74 points or 2.7 percent higher last Thursday. The run-up was fueled by the rally in the US stock market, the continuing decline in interest rates and  favorable economic data.

All major sub-indices rallied with the biggest increase posted in the mining and oil sector, rising 9.5 percent led by strong gains of Lepanto Consolidated Mining Co. and Atlas Mining Corp.

“We may still have some upside room as the run up on the local market has pushed the market’s valuation to 14.9x PE (price-earnings), still below the regional median of around 19.5x. The local market also looks attractive relatively due to our high dividends yield, earnings yield and return on equity of listed companies,” sai AB Capital Securities in its weekly market report.

AB Capital Securities, however, expects  profit-taking to set in when the market’s price earnings ratio reaches 16 times. 

“For now, the market is sentiment driven and as long as the foreign bourses remain bullish, we should be headed higher before profit taking sets in during the ghost months,” AB Capital Securities said.

With heavyweight companies like Intel, Google, JP Morgan and IBM posting strong quarter results, investors had began repositioning in the US stockmarket in anticipation of sustained economy recovery.

The US Federal Reserve has raised its 2009 gross domestic product (GDP) forecast to one percent to 1.5 percent from a range of 1.3 percent to negative two percent. It also upgraded its 2010 GDP growth forecast to 2.1 percent to 3.3 percent from two percent to three percent projected last April.