Market seen up as investors position in select stocks

MANILA, Philippines - The local stock market is expected to notch up gains on its first trading week for the year as investors position in select stocks.

“Barring any major negative developments that might transpire during the New Year’s break, potential follow-through buying might greet local equities Monday. Continuity of window dressing may resume early this week, as investors optimize returns by positioning in stock winners for 2010,” said local stock portal 2tradeasia.com in its weekly market report over the weekend.

The main composite index ended 2009 on a positive note at 3,052.68 mainly due to last-minute window dressing that pushed up select blue chip issues. For the year, the PSEi surged 63 percent year on year with industrial and holdings sub-indices posting the biggest gains.

April Tan, research head at CitisecOnline, said the stock market could go into consolidation as some stocks have already reached overbought levels. “We don’t expect the stock market to move up in a straight path in 2010. Valuations for a number for stocks are no longer attractive, while earnings growth momentum has yet to return to pre-financial crisis levels. This could then generate choppy and consolidating action into the new year,” Tan said.

“In early 2009, all stocks were trading at bargain levels since investors sold indiscriminately due to concerns over the possible impact of the global financial crisis. However, following the market’s strong rebound in ‘09, many stocks are trading at fair valuations which could limit upsides and provide windows for pullbacks,” Tan explained.

Juanis Barredo, vice-president of CitisecOnline, said the market needs to correct to provide better buying opportunities. “We don’t expect prices to return to March 2009 lows given that we’ve clearly seen the worst. The market will eventually go up given the impending economic recovery and this is why we recommend investors to buy during corrections in 2010. However, the next major upturn might take some time given that the global economy has yet to absorb all the excesses that led to the global financial crisis,” Tan said.

Among CitisecOnline’s stock picks are Manila Water, Energy Development Corp., First Gen, First Holdings Philippines Corp. and EEI Corp. Conrado Bate, president of CitisecOnline, said the upcoming 2010 elections in May could provide an additional impetus for the market.

“Peaceful and orderly national elections are likely to usher in a new period of optimism and hope, as the country’s newly chosen leader could implement reforms that will ensure the sustainability of the country’s economic growth,“ Bate said.