PSEi gathering steam

Local stocks are seen continuing to trade with some upside bias this week as cash-awash investors chase yields amid a record-low interest rate environment.

Last week, the main-share Philippine Stock Exchange index (PSEi) advanced by 111.6 points, or 1.6 percent, to close on Friday at 7,246.16.

“Philippine stocks are expected to stay positive as yearend window dressing starts to kick in,” said Jose Vistan, head of research at AB Capital Securities.

Vistan said near-term valuation concerns could cap market upside but positive sentiment should also limit downside at around the 7,050 level.

“Optimism going into 2021 is being driven by the emergence of the COVID-19 vaccine and expectations of a recovery in corporate earnings,” Vistan said.

From January to September this year, average PSEi earnings have declined by 38 percent, while three index components have incurred attributable net losses.

“These developments will be accompanied by the government pump-priming efforts and an accommodating monetary policy,” Vistan said.

AB Capital Securities sees the next resistance at the 7,486 level.

According to Joseph Roxas, president of Eagle Equities Inc., the market may have further room to rise this week.

“It seems there’s so much money in the market because real business activity is low. People are trying to put savings to work,” Roxas said.

This pandemic, interest rate based on 10-year local bonds has fallen to a record low of around 2.8 percent from 4.375 percent last year as the Bangko Sentral ng Pilipinas slashed key interest rates by a total of 200 basis points, and the reserve requirement also by 200 basis points to counter any economic fallout from the pandemic.

The PSEi has already recovered sharply from its pandemic lows, returning to levels last seen before the mid-March lockdowns that triggered an unprecedented domestic economic recession.

However, the main index is still 569.1 points or 7.3 percent behind last year’s closing level of 7,815.26. INQ