Market player expects added treat from Santa

MANILA, Philippines—Despite the recent wild swings in the financial market due to critical developments abroad, local stock market investors may expect a stronger Santa Claus rally this year as equities will likely be supported by yield-seeking domestic investors, according to local stock brokerage CitisecOnline.com.

In a market research dated September 7, the brokerage said that based on historical statistics, it might be a good proposition to be “long” in equity or in buying position at this time, until the end of the year.

While the European debt crisis would continue to hound investors, the reasons why investors should be putting more funds into the Philippine and Asian stock markets was very much intact, according to the CitisecOnline.com unit catering to high-net worth individual and institutional clients.

“And we’re not talking about economic and political issues, which remain positive,” it added. “Interest rates have fallen sharply in the Philippines, and are likely to go lower. Given the current rates of inflation, real rates are most likely negative at this point. Holding cash is never the road to riches.”

CitisecOnline.com noted that 70 percent of total turnover in the Philippine market was driven by Filipino investors—something that should not come as a surprise.

This is a development “whose time has come,” the company said.

In its research paper, the brokerage said that while global funds flow would still have an impact on local market, Filipino investors—faced with minimal opportunities to earn off their savings as savings rates fall—would continue to deepen the local market and make it more stable compared with other countries.

“This could provide a strong base for the [Philippine Stock Exchange], even if foreign funds decide to bypass the Philippines today, if only for the reason that our market has not fallen as hard as the others, and therefore not too many bargains can theoretically be found,” the research paper said.

The monetary tightening cycle in Asia is most likely over now, as commodity prices and other inflationary pressures from the West wind down, the company said. Any future macroeconomic headwind could be met with a more accommodative monetary policy, which can only be positive for the markets.

“Major Asian markets like China and India have underperformed due to higher rates. They are now in a better position to address future stress via liquidity injections. The Philippines is in a similar state,” the company said. “Therefore, we think S.C.I.C.T.T. (Santa Claus is Coming to Town). We think the fat man in the red suit won’t disappoint.”