As Du30 raises the stakes, will the market smell the bull?

As the bulls strive to cement their control of the market, investors will await cues from President Duterte’s State of the Nation Address (Sona) today.

The Philippine Stock Exchange index gained a weekly total of 128.25 points, or 1.57 percent, to close last Friday at 8,270.07.

“From a technical standpoint, the main index ended the week with half the gains that it had at the start of the week, which tells us that sellers were in control towards the end of the week, which is to be expected after the immense gains that we saw. This is considered a healthy pullback as investors that have been sitting on these issues since the beginning of the year are using this time to reallocate funds and position themselves better for the remaining months of this year,” AAA Securities head of research Christopher Mangun said in a research note.

For this week, Mangun said the market may see some profit-taking on the banking stocks after their strong performance last week.

“The next major resistance comes in at 8,480 and we may see the main index stair step its way up to the level in the coming weeks,” Mangun said.

Aside from better corporate earnings and overall economic growth, Mr. Duterte’s fourth Sona may also “provide investors with more optimism, which will fuel the rally,” Mangun said.

For business leaders, the administration should already flesh out its much trumpeted “Build, Build, Build” program and must see to it that tax reforms are in place.

“Infra projects are very difficult, by definition, including the funding,” said Francisco Sebastian, chair of local investment house First Metro Investment Corp. (FMIC), during a macroeconomic briefing.

“Government’s willingness to borrow abroad is something that we should not underestimate. We were worried before about [them] crowding out the domestic market but government is successful in borrowing abroad,” he added.

Sebastian said the recent sovereign credit rating upgrade was a “pleasant surprise” and should bode well for the government’s borrowing for infrastructure.

Rabboni Francis Arjonillo, FMIC president, said he hoped the Philippines’ sovereign credit grade would be upgraded to “A” during Mr. Duterte’s remaining years in office.

Last May, global credit watchdog Standard & Poor’s gave the country a “BBB+,” or two notches above minimum investment grade.

“This is premised on the status that despite our aggressive infrastructure activities, our financial position remains strong and this is on the back of new taxes that will be created as part of their [Tax Reform for Acceleration and Inclusion] initiative,” Arjonillo said.