PH market seen to continue following US lead

The local stock market is seen to continue consolidating this week as investors pause after a strong rally since the start of the year.

The Philippine Stock Exchange index ended flat on Friday at 7,238.52, down by 9.68 points from the previous week.

“We will continue to follow the lead of the US market given the historical high correlation between the US market and the Philippine index. Historically, the US market tended to do well from the election of a new President to a few weeks after the Inauguration Day. While the (Donald) Trump trade has played out quite powerfully since the end of the US elections, the rhetoric of pro-growth strategy and reflation from President-elect Trump could further push US markets higher,” BPI Securities president Michaelangelo Oyson said.

“The Philippine market could benefit from foreign funds flows. However, the recent wild performance of some Philippine names could put a short-term cap to the index and place the market in a short period of consolidation,” he said.

Having said that, Oyson said he remained bullish that the PSEi would once again “flirt” with the 8000 level in the first half of this year especially if the market begins pricing in a high likelihood of the passing of the much-awaited tax reform package.

President Duterte’s tax reform package seeks to reduce maximum personal income tax from 32 percent to 25 percent and the corporate income tax from 30 percent to 25 percent. It also seeks to expand the value-added tax (VAT) base by reducing the coverage of its exemptions. The program also bats for the adjustment of excise taxes imposed on petroleum products as well as the restructuring of the excise tax on automobiles except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.

Joseph Roxas, president of Eagle Equities Inc., said the market would have to correct a little more, possibly closer to 7,060-7,070. “The market is a bit overbought as the index has risen too fast too soon,” he said.

Nonetheless, he said some sectors remained attractive especially those related to tourism—gaming and hotel operations.

Local stock brokerage AB Capital said the market may consolidate within the 7,100 to 7,300 range this week, citing the upcoming European Central Bank conference as a potential catalyst and the Trump inauguration as a possible headwind.

On Friday, foreign investors turned net sellers for the first time in 10 trading days.

For next week, AB Capital said investors would track US inflation and employment data, the ECB press conference on Jan. 19, and market reaction prior to Trump’s inauguration on Jan. 20. —DORIS DUMLAO-ABADILLA