Stocks seen to sustain upswing on follow-through buying

Local stocks are seen to sustain their upswing this week on follow-through buying, seasonal quarter end window-dressing, and improving economic prospects, analysts said.

Last week, the Philippine composite index or PSEi gained three percent to settle at 2,178.78, ending three consecutive weeks of declines. The index posted its biggest gain since May 8, surging 94.17 points.

Paul C. Rafael, sales and marketing senior manager at PCCI Securities Brokers Corp., said there will be some follow through buying, aided by quarter end window-dressing activities in anticipation of favorable second quarter corporate results.

Rafael said the US Fed’s decision to increase rates by only 25 basis points (bps) is also expected to buoy market sentiment since some analysts had predicted a 50 bps increase.

US analysts, however, are expecting another 25 bps rate hike come August and expectations are that rates for the end of the year may hover between 5.75 percent and six percent.

"This development takes away one major short term roadblock to the market, which is the concern on interest rates. This doesn’t mean that domestic interest rates are not going to rise, but the Fed comment is expected to ease the pressures on global rates. Since there is no significant threat looming over the horizon, we are now advising investors to gradually accumulate," said AB Capital Securities Corp.’s Jovis Vistan.

"With the easing of interest rates, we believe that the market will move back to its bullish long term uptrend," Vistan said as he pointed out that most listed companies have stronger balance sheets and healthy profit margins.

"With the economy growing at around six percent and corporate earnings growth of 15 percent, a valuation of 11.5 times PE ratio should provide some reasonable upside for bargain hunters," Vistan said.

Stock portal 2tradeasia.com advised investors to buy on dips. Immediate support is pegged at 2,130 to 2,150 while resistance is at 2,200 to 2,250.

"Improved take-up rates within the property sector, specifically from the deluge of business process outsourcing (BPOs) and cost minimization via project tie-ups should help support interest in the counter, while series of merger and acquisition stories as well as non-dilutive Tier-2 capital raising exercises would help buoy sentiment in financials," 2tradeasia.com said.