Positive momentum to continue this week, say analysts

The market is expected to carry over its positive momentum gained from last week’s mild run, although a build-up could be slow given the presence of lingering concerns such as the volatility of the peso, the fate of Supreme Court Chief Justice Hilario Davide Jr. and the continuing influx of presidentiables for next year’s elections.

The Philippine Stock Exchange (PSE) composite index gained 35.67 points or 2.62 percent week on week to close at 1,399.07, its highest close in 18 months, as upbeat investors bought up the big cap issues. Buying picked up on optimism that third-quarter earnings will meet or exceed investor expectations.

Analysts said investors have already taken positions ahead of a possible year-end rally particularly in stocks that would likely benefit from a boost in consumer spending during the Christmas season.

"Investors will be sorting through the fresh influx of quarterly earnings reports from companies. Early indications are quite positive and such expectations are evidently being reflected in the market’s performance last week,"said Jose Vistan Jr., research head of AB Capital Securities. Vistan said stocks are also going to benefit from the prevailing low interest rates abroad as this could help bring in more investible funds.

However, Vistan said political uncertainties arising from the impeachment of Davide may somewhat dampen investor sentiment. "There is still no conclusion to the impeachment trial of Chief Justice Hilario Davide Jr. and the race for next year’s elections is just picking up steam. And if we also take valuation into consideration, the market’s advance would likely be limited in the weeks ahead. Although we are not writing off a strong year-end rally, we believe that the market is ripe for some profit taking," Vistan said.

Members of the House of Representatives, mostly belonging to the Nationalist People’s Coalition, the political party headed by San Miguel Corp. chairman Eduardo Cojuangco, voted to impeach Davide on accusations he misused nearly P48 million of the Judiciary Development Fund.

The Chief Justice denied the accusations, saying the complaint signed by 87 legislators was politically motivated. Congress is currently in recess and will resume sessions on Nov. 10. If the case prospers, it will move on to the Senate, which will act as a court to decide whether Davide should be removed.

Further weakness in the peso was also hurting sentiment. The peso fell to an all-time low of P55.50 against the dollar. The peso’s fall was partly due to the recent sale of Deutsche Telekoms stake in Globe Telecommunications to co-owners Ayala Corp. and Singapore Telecommunications. The transaction required the purchase of at least $300 million at the spot market. There were also the normal month end dollar requirements of companies and the political noise generated by the Davide impeachment.

The local currency hasn’t been getting much support from overseas Filipino workers (OFW), who have become hesitant to remit their dollars in the hope that the peso would fall further. Despite the persistent pressures against the local currency, Bangko Sentral ng Pilipinas Governor Rafael Buenaventura said he expects the local currency to strengthen to P54 against the dollar by year-end.