Holidays to temper investor participation

MANILA, Philippines - The Christmas holidays will temper investor participation in the last trading week of the year.

Moving forward, investors are still advised to pick stocks on the back of strong macroeconomic fundamentals that will ensure corporate income growth, analysts said.

“We expect the Philippine Stock Exchange index (PSEi) to trade sideways this week given the limited number of trading days,” said Gregg Adrian R. Ilag, analyst at AB Capital Securities Inc.

Trading will be thin but the main index will try to end the year at the 6,000 level, Astro del Castillo, managing director of First Grade Finance Inc., said in a phone interview.

Financial markets are closed on Dec. 24 and 25.

Week-on-week, the local market rebounded from oversold levels despite the US Federal Reserve starting to taper its stimulus program that jacked up liquidity in financial markets.

The PSEi  went up 1.18 percent or 68 points to close at 5,835.13, snapping two consecutive weeks of decline, with daily value turnover improving to an average of P6.9 billion from P6.85 billion a week ago.

For this week, Del Castillo said a potential run-up will likely be driven by year-end window dressing, a strategy of trading participants to make stock prices look more attractive ahead of their yearly portfolio report to clients.

“There is also no important economic data that is set to be released this week. There will likely be lower volume throughout the week,” Ilag said.

But moving forward, AB Capital still recommends accumulating shares given attractive risk and reward at current prices.

AB Capital said its PSEi target at 6,700 for 2014, representing a price-to-earnings ratio of 18x, down from a high of 19x in May.

“We think this multiple is undemanding based on historical trading multiples,” Ilag said.

“Fundamentals remain positive,” Del Castillo said, adding that ending the year at the 6,000 level is still a positive sign.

For this year, the PSEi hit 31 all-time highs. On May 15, the benchmark index closed at a record 7,392.20 but has since dropped to 5,835.13 due to concerns over the US Federal Reserve’s tapering and the economic impact of Super Typhoon Yolanda.