Sun Life sees stocks trading at 2,900-3,400 pts in first half

Leading financial services group Sun Life Financial Philippines is forecasting the local stock market to move within a trading range of 2,900 to 3,400 in the first six months of 2008.

Michael Manuel, chief investment officer of Sun Life Financial, said the floor of 2,900 has been the threshold mark over the past years.

“It was a time when the US Fed and the Philippine fiscal regulators were not involved in the capital markets,” Manuel explained. The ceiling of 3,400 on the other hand is the level where risk-adverse investors believe to be too volatile, “outside their comfort zone,” he said.

“If the feared recession is soft and swift, the second half of the year will be better than the first,” Manuel said. If the US economy weathers the recession threats and the US dollar remains strong, then the stock market will rebound in the second semester,” he added.

Likewise, Sun Life Financial forecasts the Philippine economy to grow by 6.8 percent this year, within the National Government’s target of between 6.3 to seven percent.

The second semester performance of the stock market, however, depends heavily on what policies will be recommended by the US Federal Reserve as the possibility of an economic recession looms.

The peso is also expected to remain strong in the first six months of the year, ranging between 37 to 38 against the dollar. If the US economy rebounds in the second semester, the peso will be tamed at the 38-39 range, Sun Life Financial said.

It added local interest rates will stay low as they mimic the US Fed’s actions although in a more conservative manner.

Sun Life Financial also sees inflation staying within the four to five percent range, as it is still supply-dictated.

Manuel said investors in the equity market have remained in the sidelines as most are actually waiting for the benchmark Philippine Stock Exchange index (PSEi) to slip below or within the 3,100-level before moving in anew.