Still in high spirits, PSEi aims for another strong week

The stock market is expected to trade with an upward bias this week amid easing economic jitters alongside the relaxation of mobility restrictions in Metro Manila and other parts of the country.

One wild card, however, is the upcoming announcement of the next MSCI rebalancing on Nov. 11. Last week, the main-share Philippine Stock Exchange index (PSEi) advanced by 4 percent to close on Friday at a 20-month high of 7,340.77.

BDO chief strategist Jonathan Ravelas said investor confidence was boosted by the easing of the pandemic curbs in the capital as the number of infected kept dropping. The slowdown in the country’s inflation rate also brought good tidings.

Philippine year-on-year inflation rate eased from 4.8 percent in September to 4.6 percent in October, lower than the consensus forecast of 4.9 percent. “The week’s close at 7,340.77 highlights [that] the market momentum is gaining traction anew. Should this condition persist, it might try the 7,400 levels—or even the 7,432.40 intraday peak in January—in the near-term,” Ravelas said.

But the PSEi’s failure to test the said levels could prompt some profit-taking, Ravelas said.

Jose Vistan, head of research at AB Capital Securities, also said the country was “beginning to see some sense of normalcy.”

From alert level 3 previously, alert level 2 now allows restaurants and various establishments to operate at 50 percent of indoor capacity. Children are also now allowed to go out.

“Coupled with the lower-than-expected October inflation, the market has garnered enough momentum to move up this week,” Vistan said.

This, even if current stock valuations were quite high relative to regional peers at 18.7 times projected earnings, he said. “The Philippines does stand out, along with Vietnam, among markets which still have earnings growth rate at double-digits in 2022,” he said.

Vistan also said the upcoming MSCI rebalancing was not related to market fundamentals, but this could still create some volatility and price actions. INQ