Following a spectacular week of gains, analysts remained positive on Philippines stocks. The consensus is that high valuations can trigger pockets of profit-taking but the overall trend remains bullish and even “euphoric” for now.
The benchmark Philippine Stock Exchange index (PSEi) gained 2.7 percent last week, with Friday alone providing a 1.72-percent jump for the index to hit a fresh record high of 7,215.35. This came a day after the country received an investment-grade rating from Standard and Poor’s, a month after the Fitch Ratings upgrade.
“The PSEi will continue to astound investors with its strength,” Maria Arlysa Narciso, equities analyst with stockbrokerage firm AB Capital Securities Inc., said in a weekly outlook report. “The low interest rates, strong peso, improving growth rate and the government’s transparency all contribute to [the Philippines] becoming one of the favored investment destinations in Asia. Meanwhile, share prices have reached high levels but the market’s appetite remains strong.”
Jonathan Ravelas, chief strategist with BDO Unibank Inc., said investors remained upbeat. He noted that while Friday’s close put the PSEi near his own target of about 7,300, continued stable economic fundamentals might provide investors with further upside.
“We have low interest rates and stable inflation so this is still a conducive environment for investors,” Ravelas said. “The Philippines really is the darling of the market now.”
As with previous instances when the market showed continued strength, Ravelas said that vulnerabilities remained and some investors could see opportunities to book profits. The PSEi has gained about 24 percent so far this year, after rising 33 percent in 2012.
Ravelas said the Philippines has indeed achieved a higher growth trajectory but that more is needed to be done to encourage job-creating direct foreign investments such as bringing down costs and improving the ease of doing business. Despite high valuations, he said opportunities remained, specifically for conglomerates with large infrastructure-related assets as well as the power-generation sector.—Miguel R. Camus