Volatile trading seen

Local financial markets are on holiday break today (Monday) in celebration of the Lunar New Year, which ushers in the Year of the Fire Monkey.

Last week, the Philippine Stock Exchange index (PSEi) gained 77.51 points or 1.16 percent to close at 6,765.13 on Friday in a volatile trading week.

After breaking a resistance level at 6,750, traders are next looking at the 6,800 level.

In a joint research note issued by First Metro Investment Corp. and University of Asia and the Pacific (FMIC-UA&P) last week, another challenging year for the Philippine economy was projected for 2016.

For the equities market, the research said there could be modest gains in the next 12 months but warned that periods of volatility might see the market ignoring fundamentals periodically.

Against this backdrop, FMIC-UA&P preferred a “tactical and selective” strategy from the traditional “buy and hold.”

“Our outlook is based on our perceived drivers of returns being mixed. The local economic backdrop appears to be in better shape relative to neighboring economies, but valuations and foreign fund flows are neutral to unsupportive,” the research said.

“We prefer to overweight on consumer staples as drivers remain intact—rising disposable income, cheap oil, low inflation and election boost,” it said.

“Overweight” is a recommendation to increase allotment in one’s portfolio relative to the benchmark index such as the MSCI.

“For investors with longer investment horizons (more than a year), this drop in the PSEi may be an opportunity to accumulate Philippine stocks at lower valuations. The country remains one of the best growth stories in Asia,” the research said.