Stocks seen to continue moving sideways this week

MANILA, Philippines - Local stocks will continue to move sideways this week ahead of the long Lenten break.

COL Financial Group president Dino Bate said investors are likely to stay on the sidelines as they reassess their strategy amid the market’s overbought level and the shortened trading week.

AB Capital Securities Inc.’s Gregg Ilag said the market is seen consolidating between 5,029 and 5,085 levels, pointing out that any rallies that will send the index above the 5,100 level will be short-lived due to the absence of fresh leads.

“In terms of fundamentals, we think that PSEi is fairly valued at 5,095. The upside will be limited given the current index level,” Ilag said.

Year-to-date, the PSEi has risen by 16.83 percent, less than 100 basis points below the 17.7 percent peak posted in mid-March.

“Basic internal activity indicators suggest a bull raging to get out of its cage,” Calaycay said as he noted an almost three-fold increase and more than 50 percent rise in average daily volume and value turnover, respectively.

Calaycay said average foreign buying amounted to P314 million, a reversal of the previous year’s net selling of P66.15 million daily.

Over the last two years or so, the Philippines has been among the leaders in Southeast Asia, broader Asia-Oceania as well as among global markets.  The PSEi outperforms the regional benchmark (ex-Japan) by a multiple of 1.20 and the broad US measure by 1.40.

Thailand, an almost similar economy and coming off a devastating flood, trails the Philippines by nine basis points.

With the PSEi hitting multi-year highs, the PSE ranks 3rd most expensive in the Asia-Oceania region and second to Jakarta in the South East. Singapore, whose return is less than three percentage points than PSEi, remains cheap relative to its 12-month earnings.

Despite high PE valuations based on trailing earnings, Philippine shares remains competitive in the Asia-Oceania region when considered from the risk-reward standpoint, Calaycay said.

“Better numbers will inspire a more aggressive build-up of equity portfolios. Inflation number for March will be a critical factor moving forward,” he said.