Stocks seen to take breather

MANILA, Philippines - Local stocks may take a breather this week amid escalating tensions between Iran and Israel and rising oil prices.

Last week, the Philippine Stock Exchange index (PSEi) skyrocketed to a new record high, closing at 5,016.30 and gaining up 123.3 points or 2.5 percent week on week bolstered by another cut in domestic interest rates.

“We expect the market to consolidate with some traders likely to take profits from the current run to record highs,” said AB Capital Securities

Investors are expected to keep a close eye on global oil prices, which have risen more than 15 percent since last month. Higher crude and gasoline prices could curb consumer spending and stifle economic recovery.

Crude oil has hit a 10-month high above $110 on supply concerns in the Middle East.     

“Sustaining positive momentum is the biggest challenge to the market moving forward, hindered by a growing assessment that Philippine valuations are high relative to its peers in the region,” said Accord Capital Equities Corp.’s Jun Calaycay.    

Calaycay noted that the market’s price-to-earnings ratio has increased 17.8 times, the second highest among markets in Asia.

Nevertheless, he expects domestic investors to shift to fundamentals as more companies post their 2011 financial and operating results.

AB Capital Securities believes that any pullback will be minimal as so much “liquidity are still on the sidelines, waiting for opportunities to come in.”  

It has advised investors to take advantage of dips with particular focus on banking issues like Metrobank and Security Bank, and energy stocks like First Philippine Holdings and Energy Development Corp.

 A possible upgrade from Moody’s Investor Service is also seen to boost the market. Finance officials believe the country is underrated given the government’s improving debt and revenue ratios.

The rating agencies are upbeat on the government’s aggressive push for reforms in sin taxes as it is seen to prop up the economy by as much as 1.3 percent.