Market poised for an upside break, may hit 2019 high in 2nd half

The local stock barometer may test its 2019 high of 8,400 later this year in line with the upswing across emerging market and global equities.

This is according to Ron Acoba, chief investment strategist at trading research provider Trading Edge Consultancy, who believes that the Philippine Stock Exchange index (PSEi) is poised for an upside break.But for a couple of months, Acoba said there would likely be a period of consolidation under the key major resistance within the 7,300 to 7,500 zone.

Last week, the PSEi closed at 7,238.46, down by 51.46 points or 0.7 percent week on week. Since the start of the year, the index has gained 98.75 points or 1.4 percent.

“We believe the index is in a position for an eventual upside break. This is suggested by the respective upside breaks in the MSCI world index and the MSCI emerging markets asia index,” Acoba said.

Both the MSCI world and MSCI emerging markets Asia indices have hit new-time highs early in the year.

Following a break of the major resistance at 7,500, Acoba said the index might reach its 2019 high of 8,400 at one point in the second half of this year. “Our EPS (earnings per share) estimate for 2021 is a growth of at least 20 percent only because it’s coming off a low base in 2020. Even with the said EPS growth, earnings would still fall behind the pre-COVID levels,” he said.

In the first nine months of 2020, the average EPS of PSEi stocks fell by about 36 percent.

In 2020, the PSEi declined by 8.6 percent to close at 7,139.71. The index hit a low of 4,623.42 on March 19, 2020 when the whole of Luzon was placed under enhanced community quarantine before other key regions followed suit. As of the end of the year, however, the index clawed back 2,516.29 or 54.4 percent from the year’s bottom as investors welcomed the easing of lockdown restrictions and positive news about COVID-19 vaccine development and distribution. Last year, foreign funds were net sellers to the tune of P128.65 billion, larger than the P14.26 billion in foreign outflows seen in 2019. Daily average value turnover slightly improved to P7.35 billion from P7.29 billion in 2019. INQ