Citisec expects PSEi to hit 5,500 by yearend

MANILA, Philippines - Leading online brokerage firm CitisecOnline expects the main-share Philippine Stock Exhange index to climb toward 5,310 to 5,500 by yearend as global funds shift their focus from developed to emerging markets, especially in Asia.

In a briefing yesterday, CitisecOnline chief technical analyst Juanis G. Barredo said the market, which has had a sustained bullrun, is headed for a modest bump in the road followed by more gains that would propel the index to the 5,500 level.

Year-to-date, the PSEi has risen by 18 percent or 38.5 percent from its lows in October 2011.

“Although medium to long-term trends still point upwards, some short-term corrective adjustments may be needed soon perhaps within the next two months. Recent run-ups are reaching overbought zones and have subsisted here longer than usual but this may be because of the results of the heaviness in global liquidity,” Barredo said.

Barredo, however, said the stock market correction would be limited, pointing out that the country’s strong macroeconomic fundamentals and the present low interest rate regime would continue to help the Philippines attract more investments.

“If corrections begin from current levels (5,127), we see the index pulling back only to bout 4,900, with a small chance of reacting to 4,790,” Barredo said.

Barredo has advised investors to wait for consolidations that offer better risk-reward prospects.

April Lee-Tan, CitisecOnline head of research, said the long-term outlook remains positive due to low interest rates across the globe, ample liquidity and strong likelihood for a credit rating upgrade.

The prevailing low interest rates, which have sharply dropped from 17.62 percent in 2001 to around 5.84 percent, is seen to further perk up investor sentiment, Lee-Tan said.

She said the absence of structural problems facing developed economies and strong banking system has made the Philippines a more interesting and viable investment destination relative to developed economies.