Stocks seen to head north

Local share prices are expected to head north this week as investors take position for the new year.

During the first trading week of 2014, which consisted of only two working days, the main-share Philippine Stock Exchange index advanced by 58.10 points, or 0.99 percent, to close at 5,947.93 on Friday.

“From a technical perspective, we see that the PSEi’s close last Thursday triggered a divergence to the Relative Strength Index. We view this as a bullish sign that will trigger a rally in the near term,” said AB Capital Securities analyst Gregg Adrian Ilag.

AB Capital Securities sees support at 5,890 and resistance at 6,060.

Ilag said further gains for the market could be expected this week as investors continue to reposition for the year.

“We think the current prices are offering attractive upsides to valuation, which is why we prefer buying shares at current levels,” he said.

The PSEi is now trading at 14.36x 2014 P/E (price to earnings) compared to the peer median of 11.65x, Ilag said. This means that investors are paying 14.36 times the amount of money they expect to make from this roster of stocks this 2014.

“We only expect modest returns for the index this year given higher valuation multiples and slower earnings growth in 2014. However, we do see stronger returns from some individual stocks with attractive growth stories and valuations,” Ilag said.

AB Capital also sees higher returns from consumer, gaming and property sectors, which the firm expects to post the strongest profit growth among its monitored stocks for 2014. The brokerage house sees profit growth for these sectors this year at 13 percent, 32 percent and 20 percent, respectively.

Meanwhile, Jonathan Ravelas of Banco de Oro Unibank said the index continued to move downward.

“Should the strong resistance of 6,000 be broken, a move towards 6,200-6,250 can be expected,” Ravelas said. “Failure to breach 6,000 may retest the 5,800-5,850 levels.”  Doris C. Dumlao