Stocks to take cue from Q3 earnings

MANILA, Philippines - Investors are keeping their fingers crossed positive leads would continue to come and help buoy the local stock market.

Analysts said there’s a lot of optimism on the soon-to-be-reported third quarter earnings.

“Upsides are to be seen especially for corporate earnings,” said Jason Escartin, investment analyst at F. Yap Securities.

He said a confirmation of Manila Electric Co. good third quarter numbers may spread to other bellwether stocks.

“Optimism in the distribution utility’s prospects could spread to other bellwether stocks, especially those that hold considerable interests in Meralco,” he said.

The market ended last week on positive note after the European Central Bank (ECB) hinted it may extend its stimulus plan beyond 2016. 

The benchmark PSEi rallied 181 points to end at 7,236 (+2.56 percent week-on-week), primed by services (+4.07 percent); industrials (+3.88 percent); and services (+3.55 percent).  Average turnover continued to fall 3.8 percent to P5.72 billion, while market breadth favored optimists, 98 to 82.  Foreigners were net sellers at P202 million, Escartin said.

Luis Limlingan, managing director at Regina Capital said the first one to two trading days will be crucial as the index needs to confirm the breakout setup by holding above 7,180.

“Based on pattern breakout, we forecast the index to reach an initial price target of 7,360, which could extend to 7,540, provided that no technical divergences are spotted.  On a longer-term perspective, the index’s primary perspective, the index’s primary trend is still down and until 7,700 is breached, there’s still the possibility that the index could only be rallying toward its third reaction,” he said.

Escartin, meanwhile, said investors would also continue to keep a close watch on China.

“China’ Central Committee will hold a widely-anticipated plenum on Oct. 26 to 29, to draft its five-year national economic and social development program for 2016 to 2020.  The meeting is being held given mounting pressure to implement a shift towards consumption, while maintaining growth,” he said.

He said that while President Xi Jin Ping assured their country would not suffer a hard landing, the Politburo also emphasized China should deal with the “new normal”, which entails overhaul of macroeconomic regulations and commitment to keep growth at medium-to-high level.  Any hint for fiscal and/or monetary stimulus would help buoy regional sentiment on the near-term,” Escartin added.