Most local stocks may continue to gain ground this week following last week’s surprise Philippine sovereign credit-rating upgrade by Standard & Poor’s.
Last week, the main-share Philippine Stock Exchange index (PSEi) gained 1.55 percent or 104.29 points to close on Friday at 6,847.26 after S&P’s move put the government’s rating a notch above the minimum investment-grade rating.
“Chartwise, with the break above the recent high of 6,815, expect the index to test the 6,900-7,000 levels in the week ahead,” said Banco de Oro Unibank strategist Jonathan Ravelas.
Joseph Roxas, president of local stockbrokerage Eagle Equities, said the market could still find some upside from foreign funds that have yet to come in.
“There may be some small correction but it will recover quickly,” he said, adding that week-on-week performance this week might be flat to higher.
In a research note on Friday, Citi Philippines economist Jun Trinidad said S&P’s upgrade supported risk asset appetite/positions in local equities.
“Near-term, the peso would probably be better poised to reflect the rating upgrade as it probes 44 to end the week. Recent monetary tightening could still lead to cautious bond market sentiment while the equity market remains focused on first-quarter 2014 corporate earnings reports,” Trinidad said.
But for the reform agenda to sustain its broad-based support and stay politically relevant, Trinidad said the reform benefits would have to be felt by impoverished families that comprised the biggest segment of the population.
“At the macro level, confirmation of inclusive growth taking root would be for a jobless rate declining to 6 percent or less. This implies job creation of at least 400,000-500,000 to kick-start the reduction of unemployment under investment-driven growth in a reform environment,” Trinidad said.
A single-digit underemployment rate would also be a clear sign of tightening labor markets, Trinidad said.
“Sustaining low inflation coupled with higher ‘targeted’ social expenditures would be a boon to purchasing power of fixed income wage earners,” he said. Doris C. Dumlao