Phl stocks seen to track Wall St

MANILA, Philippines – Local stocks may move higher at the start of trading this week, tracking strong gains on Wall Street and boosted by the country’s sound fundamentals.

The Philippine Stock Exchange index (PSEi) took a wild see-saw ride last week, closing at 4,893 Friday as concerns over Greece still persists. The PSEi hit a new intra-day high of 4,997 during the week, just a few points shy of 5,000.

Local stocks are expected to benefit from the strong showing of the Dow Jones industrial average and the Nasdaq Composite which rose 0.3 percent and 0.4 percent, respectively, last week.

“The PSEi’s rally brought it to a PE of about 17x. This is a new high compared to its five-year average of 13x. While we have assessed that a correction is warranted as most issues are already overbought, the appetite of the market seems unabated,” AB Capital Securities said.

“This bullish sentiment is supported by the country’s sound fundamentals,” AB Capital Securities noted.

The Central Bank’s rate cut pushed properties higher and allowed the sub-index to recover from last year’s slump. Year to date, the property counter has gained by 21 percent led by heavyweight Ayala Land.

Also benefiting from the rate cut is the financial services sub-index which hit the overbought level due to positive earnings of some of the biggest banks. This sector benefits from having low rates as it boosts demand for consumer loans with the lower cost of borrowing.

AB Capital Securities said oil prices be in focus, pointing out that if oil keeps rising, it will dampen consumer confidence and pressure the stock market. “Growing tensions between Iran and the global superpowers pose a threat to the world’s oil supply. Europe joined the US in calling for Iran to stop its program and announced it will no longer source its oil needs by June,” AB Capital Securities said.

“We see this geopolitical tension as another cause for oil prices to spike. NYMEX is already at $108/bbl and could move higher due to both a potential supply disruption and growing demand as economies recover. Other sources of oil are necessary right now as the region which supplies 54 percent of global demand is facing such tension,” AB Capital Securities added.