Market likely to consolidate

MANILA, Philippines - The local stock market will likely be in a consolidation phase this week after disappointing US jobs data heightened concern about a slowing US economy.

The Philippine Stock exchange index (PSEi) welcomed July strongly and gained 2.22 percent week on week to close at 5,362.68 as investors loaded up on several blue-chip issues. The main index hit a new intraday high of 5,403.16 after the S&P raised the Philippines’ credit rating to within one rung of investment grade.

“The PSEi’s rally seemed to have already lost some steam. Correction is possible next week after reaching high valuations and overbought levels for the market. The local outlook, although still rosy, will remain influenced by external weakness of major economies,” said Maria Arlysa E. Narciso.

US employers hired at a dismal pace, creating only 80,000 jobs in June, fewer than needed to bring down the 8.2 percent unemployment rate.

The weak jobs data came a day after the European Central Bank cut interest rates, fueling fears that the Greek debt crisis was shifting the US economy into low gear.

Narciso said the main benchmark index’s recent rally brought its valuation to a PE of 18.4 times, making the PSEi among the expensive markets in Asia.

Accord Capital Equities Inc.’s Jun Calaycay said any pullback is good for the market as it opens doors for long-term acquisition and profit opportunities.

He said the country’s strong macroeconomic fundamentals will provide a buffer against an uncertain global environment.

Last week, Bank of America Merrill Lynch revised upward its Philippine growth forecast by 120 points to five to six percent as it sees a more aggressive public-private partnership (PPP) roll-out program.

The government is looking at a GDP growth of 5-6 percent for the year led by services, construction, and manufacturing.

“With tempered inflation easing to 2.8 percent in June, there is more reason for the Bangko Sentral ng Pilipinas to keep interest rates steady. This economic backdrop entails that achieving the government’s growth target is not far off,” Narciso said.