Stocks seen gaining on easing of US-China trade war jitters

The local stock barometer may firm up for the second straight week as US-China trade war jitters ease.

Last week, the main-share Philippine Stock Exchange index (PSEi) rose by 0.81 percent to close on Friday at 7,801.72. This was the first time in four weeks that the main index ended higher due to the MSCI rebalancing, which has been fully priced in by now.

The index may now be on the way up, said veteran stockbroker Joseph Roxas, president of Eagle Equities Inc.
“It seems that the trade war has been resolved,” he said.

The index may next target 8,000 and possibly end this year at 8,200, he said.

For Papa Securities, all eyes are on the Bangko Sentral ng Pilipinas’ monetary setting on Thursday (Dec. 12).

An interest rate cut—which would be a surprise—could be aimed at speeding up government projects next year, Papa Securities said. However, if manpower is the real issue, lower interest rates are unlikely to help, the brokerage added.

“On the PSEi, momentum indicators are pointing toward a rally back to the 8,000 mark with both RSI (relative strength index) up and a bullish MACD (moving average convergence divergence) crossover about to form. If trade talks, which should finish on Dec. 15, yield positive results, the PSEi could be in for a strong start in 2020,” Papa Securities said.

For BDO Unibank chief strategist Jonathan Ravelas, however, the week’s close at 7,801.72 showed that the recent bounce was not sustainable.
“Risk lies at the break below 7,700, which paves the way for a test of the year’s low at 7,514.05 levels, which could occur in the near-term,” he said.
In a joint research note, First Metro Investments Corp. and University of Asia and the Pacific (FMIC-UA&P) said that while the corporate earnings outlook for the fourth quarter might not be as remarkable as the third quarter, reports given that bank earnings were unlikely to repeat amid fairly flat long-term bond yields, they still remained optimistic for the rest of the year and 2020. The MSCI rebalancing in November should have provided entry opportunity for investors,” the research said.

The FMIC-UA&P research said that the PSEi might end the year at about 8,400 and hit new highs next year. This would represent a gain of 933.98 points, or 12.5 percent, from 7,466.02 at end-2018. INQ