After a long holiday break, the local stock market is seen to reopen today still on a sluggish note.
For the full year 2016, the Philippine Stock Exchange index lost 1.6 percent to close at 6,840.64, marking the second straight year of decline for the local stock barometer.
“I think that in the first few days of January, it will still be a little bit down,” said AsiaSec Equities chief strategist Manny Cruz, “But market has strong support at 6,700.”
Cruz said it was possible that the PSEi would retest 7,000 within this month.
“The positive development we’ve seen before yearend close was that we seem to have a buying momentum for foreign investors,” Cruz said, noting the net foreign buying in the last two trading days of 2016, “Hopefully, the momentum will be sustained.”
Along with a consensus corporate earnings growth of 9 to 10 percent this year, Cruz said the recent drop in valuations should encourage investors who wish to take a position for 2017.
One key challenge seen this year, however, would be a depreciating local currency.
With interest rates seen to rise three times this year, the local currency is seen to take further beating.
But with stock market valuations having fallen from as high as 24x to below 15x, investors are seen to pick up bargains this new year.
A P/E ratio of 15x means that investors are paying 15 times the kind of money they expect to make.
Other key challenges for the market this year include policy uncertainties in the US as President-elect Donald Trump assumes office this month alongside domestic political noise. —DORIS DUMLAO-ABADILLA