Rosy outlook expected to prop up share prices

MANILA, Philippines - The stronger-than-expected Philippine economic growth in 2013 and better outlook for this year will support a gradual improvement in share prices this week.

Investors will likewise keep an eye on US economic data that will signal how fast liquidity will dry up due to the US Federal Reserve’s tapering, analysts said.

“We expect the market to display gains this week driven by positive consensus revisions to 2014 gross domestic product (GDP) estimate after the strong full year GDP of 2013,” said Gregg Adrian R. Ilag, analyst at AB Capital Securities Inc.

“From a technical perspective, we view the Philippine Stock Exchange index’s (PSEi) close above 6,000 as a positive indication of a strong support level,” Ilag said.

However, gains will be tempered by concerns overseas like the weak China manufacturing data and the US Fed’s fresh cut in its monthly bond purchases as the US economy improves.

“Both translate to an attractive proposition for funds to exit emerging markets and begin to up bets on advanced economies,” said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

Week-on-week, the bellwether PSEi lost 2.43 percent or 150.31 points to 6,041.19, with foreign selling of P3.9 billion. Financial markets were closed on Friday for the Chinese New Year.

The main index slipped to the 5,900 level after the US Federal Open Market Committee cut back its monthly bond buying by another $10 billion to $65 billion.

But the PSEi climbed back to the 6,000 support level after the government reported that Philippine GDP picked up 7.2 percent last year, above the official target of six to seven percent, despite calamities.

“We view this pullback as an opportunity to buy individual issues with strong earnings per share growth and valuation upsides,” Ilag said.

Economic data to be released this week include the US unemployment rate and monthly non-farm payrolls.

“Investors will likely speculate and change their view on the pace of quantitative easing tapering if payrolls do not improve significantly from the December results,” Ilag said.

On Friday, disappointing corporate earnings dragged Wall St with the Dow Jones industrial average slipping 0.94 percent or 149.76 points to 15,698.85 while the broader Standard & Poor’s 500 index shed 0.65 percent or 11.60 points to 1,782.59.