Stock index seen testing 8,000 level

The local stock market, which has bounced back to bull market territory, is seen rising and pushing the main index to 8,000 levels in the short run.

Last week, the main-share Philippine Stock Exchange index (PSEi) racked up 180.98 points or 2.4 percent to close on Friday at 7,841.99, the highest level seen in eight months.

Jonathan Ravelas, chief strategist at BDO Unibank, said the stock market was perked up by optimism that the first phase of the Duterte administration’s tax reform package would be passed by June 2 this year after the House of Representatives committee on ways and means approved a consolidated bill imposing a P6 diesel tax and increasing levies on other oil products and on cars.

“The recent break above 7,800 levels signals we are back to bull market territory,” Ravelas said, noting that the local stock barometer had already climbed by 20 percent from the recent bottom of 6,500.

“Chartwise, the week’s close at 7,841.99 highlights the market has the momentum to assault the 8,000-8,150 levels in the near term. Any pullback, if any, is limited toward the 7,600-7640 levels,” Ravelas said.

“The market is starting to price in the passage of the tax reform this year. We are still in a bull market. However, its sustainability, given where valuations are, depends to a large extent on the passage of the tax reform. To justify higher valuations, the Philippines needs to break out of the 6- to 7-percent GDP (gross domestic product) growth rate range,” BPI Securities president Michaelangelo Oyson said.

Citigroup sees the Congress passing the tax reform bill by the third quarter of this year or to early fourth quarter at the latest.

“While still in early days, we believe the committee bill despite the ‘modifications’ sends a positive signal of fiscal reform,” Citi economist Jun Trinidad said in a research note.

“Certified as urgent by Malacañang, with President Duterte having certified the tax reform package as among the legislative priorities for the remainder of this congressional session (first session of the 17th Congress ends June 2), there is a narrow window for the House version to be approved (plenary discussion) within the month. Having the final approved House version soon triggers formal legislative discussions on the tax bill in the Senate chamber that may commence early August (second session opens late July),” Trinidad said.

Meanwhile, the stock market is seen to digest this week the impact of French elections.