Stock investors told to be cautious

CEBU, Philippines - Stock market investors are warned to be selective when buying stocks and focus on putting their investments on sectors that could benefit from President-elect Rodrigo Duterte's economic policies and avoid sectors that could suffer.

Market analysts at the investment powerhouse COL Financial Philippines believe that the prospects of more foreign direct investments (FDIs) and higher spending capacity given a progressive tax system should benefit the consumer sector.

Sectors like banking, property, and companies focused on infrastructure should benefit from plans to accelerate infrastructure spending and also increase FDIs.

 Analysts also believe that the property and mining sectors shall benefit from plans to address restrictive economic provisions.

 While companies involved in selling alcohol and cigarettes could expect negative performance as the incoming President has been very vocal about his plans to implement a nationwide ban on smoking and drinking.

  According to COL Financial vice president and head of research April Lynn Tan, there are many reasons for the sudden turn-around in sentiment towards the presumptive President. These include his "clean" reputation, his well-received eight point economic agenda, which include plans to continue and maintain the macro-economic policies of the Aquino government, and his strong track record in executing plans.

"We are not discounting the possibility that the market's ongoing rally can continue. Stock markets typically rally for several months after a business friendly reform minded candidate wins the presidential election as evidenced by the rallies of the Indian and Indonesian stock markets in 2014, and the rally of PSEi in 2010," Tan said.

At present, the PSEi is already up by 7.3 percent since May 9.

On the other hand, although the country's economic growth outlook under a Duterte administration looks attractive, it could take a while before the new President can implement any major reform.

   Another threat facing the Duterte administration, analysts said is the possible ballooning of the country's deficit/GDP ratio as a result of Duterte's plans to reduce taxes and increase infrastructure and social spending. This could lead to higher interest rates, negatively affecting the stock market.

 Meanwhile, Tan added that investors are also advised to buy the market on pullback.

 "We believe that it still pays to exercise caution as threats continue to exist," she said mentioning that the US Fed recently hinted that it may raise interest rates as early as June, while other global central banks have stopped implementing more monetary structure. (FREEMAN)