PSEi seen retesting record highs

The local stock index may retest the 5,350 level this week as investors savor the favorable outcome of a crucial European Union Summit and reports showing good economic indicators.

Last week, the main-share Philippine Stock Exchange index surged by 126 points, or 2.47 percent, to finish at 5,246.41 on Friday. This was despite a flat trading toward the end of the week.

“It’s possible that we will retest record highs. Most markets overseas are up,” said Joseph Roxas, president of Eagle Equities Inc.

Historically, July is good for stocks only in the first few weeks, Roxas said. “But this time, we’re coming out of a consolidation phase, so it may be good.”

Last week’s rise may have been aided by window-dressing, Roxas said, noting that there might be enough strength for the PSEi to resume its climb.

Freya May Natividad, an analyst at 2TradeAsia.com, noted that officials from 17 members of the European bloc agreed to relax crisis loan conditions, initially with Spain’s banks. This was followed by a motion to allow the recapitalization of financial institutions without the need to go through their respective governments, she said.

Natividad said the market would be awaiting the results of the European Central Bank (ECB) policy meeting on July 4, as details unfold on how the European Union (EU)-approved 120 billion-euro funding package ($149 billion) would be utilized to promote growth. Any “implicit indication” toward “fiscal integration,” coupled by potential easing in monetary policies, will provide a big sentiment boost to regional equities, she said.

Given these developments, Natividad said that attempts toward 5,350-5,400 might be tested by the PSEi this week.

She said local price-to-earnings ratios (P/Es) were “undemanding” at 13x based on 2013 earnings estimates.

“More can be spotted relative to upside potentials,” she said.

“In the meantime, stay alert for possible supply pressure as gauges breach higher grounds. Monitor continuity of momentum build-up,” she said.

2TradeAsia.com sees immediate support at 5,200 and resistance at 5,350-5,400.