MANILA, Philippines - The local stock market may test new highs this week with investors optimistic about domestic corporate earnings and the country’s economic potential.
Last week, the Philippine Stock Exchange index (PSEi) climbed by 1.53 percent to close at a new all-time high of 4,458.74.
“We feel that since most major economies are already struggling with their respective debts, emerging economies are given a second look in terms of fiscal and monetary strengths. With the help of the ratings upgrade and solid fundamentals, we think that the index can move higher to its next target of 4,500,” said AB Capital Securities Inc.
Jun Calaycay of Accord Capital Equities attributed the market’s ascent to early positioning in stocks that are expected to report higher earnings.
He said the prospects for the rest of the year remains positive. “We therefore adjust our recommendation from short-term sell to medium-term accumulate,” he said.
Calaycay said the sustained rise in gold and oil prices will keep investors interest trained on the mining and oil sector. Gold prices closed at $1,593.80 per ounce, up 7.5 percent since July 1 while crude prices spiked to $97.24 per barrel, prompting local industry players to raise pump prices anew.
Among the mining stocks that will continue to be within investors’ radars include Philex Mining Corp., Atlas Conslidated Mining Corp., and Lepanto Consolidated Mining Corp.
Calaycay said the government’s successful completion of a P323.4 billion bond swap eases the pressure off the government’s fiscal management efforts as it frees up to P152.6 billion, which can be used by the government to pump prime the economy.
Another factor that has boosted investor sentiment is continuous strong remittances from overseas Filipino workers. Remittances for the month of May reached $1.688 billion, the highest since December 2010’s $1.694 billion, bringing year-to-date amount to $7.899 billion, which is six percent higher year-on-year and roughly 40 percent of the full-year projection.
“One good thing going for the local market so far is the relative stability in the political front. We recall that in the bull market of 2003 to 2007, the political backdrop was rather messy. There were coups of various proportions and measures of success - and failure – practically every year,” Calaycay said.