Investors advised to stay on course

The local stock market is still on a “secular” bull cycle as it maintains the index target of 10,000 by 2018, stock experts from Philequity group said.

Despite a string of recent negative news here and abroad, the fact that the Philippine Stock Exchange index broke past the 7,000 barrier suggested the market possessed an “underlying strength,” enabling investors to buy on dips, said Miguel Agarao, an analyst handling institutional sales at Wealth Securities.

Last week, PSEi jumped 128.17 points, or 1.86 percent, week-on-week

to close at 7,008.51 on Friday, getting a boost from the latest MSCI rebalancing. The index is now trading at 14-month highs.

Wealth Securities is “neutral” on the market over the short-term, but bullish over the long term, Agarao said in a briefing for Philequity investors last Saturday.

Agarao also advised investors to stay on course.

Jerome Gonzales, head of research at Philequity Management Inc.—a fund management firm whose equity funds have consistently outperformed the PSEi over the last 20 years—said the previous consolidation phase would act as a strong support for the market.

Gonzales said the Philippine stock market had recently finished the fourth of five Elliot waves—a tool for technical analysis which tracks repetitive patterns or waves to anticipate market cycles.

Gonzales said that, while the peak of the wave was around 7,400, which was hit last year, wave 5 would hit a new high of 8,290.

The group maintained the view that the record high of 7,400 would be revisited by the first quarter of 2015 and further reach 8,100 by the first quarter of 2016. The long-term goal is 10,000, assuming that the pace of reforms will continue, while structural changes are delivered and other important growth drivers developed.

“Technical analysis is not an exact science,” Gonzales said. “Sometimes the waves are shorter, sometimes they extend. What’s important is the direction moving forward is higher.”

Wilson Sy, director of Philequity, said that while there had been concerns on what would happen by 2016—when the Philippines will elect a new president—the market could take comfort in the view held by global rating agency Standard & Poor’s that the structural reforms in the country would endure beyond 2016.  Doris C. Dumlao