MANILA, Philippines - The local stockmarket is likely to drift sideways this week, albeit with a positive bias on the back of positive cues arising from a fairly peaceful electoral process.
Last week, the main composite index surged 188.36 points or 5.99 percent to close at 3,330.42, mainly due to the smooth Presidential elections and hopes that Europe’s emergency loan package would stave off a debt crisis in Greece.
“Despite all the positive factors surrounding the market, it isn’t a sure thing that the market will continue to rally in the coming weeks. The situation surrounding Greece and the other European countries are not yet over,” said Prince Yeung of AB Capital Securities.
Jun Calaycay of Accord Capital Equities said the PSEi may experience intermittent drops after concerns over Europe’s bailout plan resurfaced. However, he said strong corporate earnings results would lift investor sentiment.
Most companies that released their first quarter earnings results posted higher profits — EDC, Aboitiz Power, Metrobank, Banco de Oro, and several others. The higher than expected earnings have made valuations more attractive, allowing the PSEi to reach new highs this past week.
In a market report, DBP-Daiwa said the market is seen to remain upbeat. Among the key drivers for a sustained upward trend is the “fairly successful Philippine election,” which could set the tone for political reforms and the continuous recovery in the external macro data.
Other factors that will boost sentiments are the “substantial and specific policies that will be formed by the upcoming administration” and the sustained growth of corporate earnings for the coming quarters.
“The country’s ballooning budget deficit could be seen as the main hurdle in the expected recovery given the contagion in Europe that could affect the country’s external debt,” the brokerage firm said.
The Philippines’ external debt to Europe accounts for six percent of the country’s total external debt.