Bargain-hunting seen

Local stocks took a beating last week as foreign funds exited amid worries that the US Federal Reserve would scale back monetary stimulus.

Despite clawing back gains during the last two trading sessions, the benchmark Philippine Stock Exchange index (PSEi) was down 4.6 percent to 6,701.95 week-on-week.

Given the steep decline, stockbrokerage firm AB Capital Securities Inc. said this opened up opportunities for bargain hunters, who could provide further support to the market. It cited the closely tracked price-earnings ratio, which indicates how expensive the market is at any given time.

“From one of the most expensive markets in Asia, our PE now stands at 19.58 times from the 20 plus levels we have seen before this plunge,” AB Capital said in its weekly outlook report. “While it may still be higher than our neighbors, our economic data and company earnings justify the valuation level of the PSEi. Compared to China and Japan, the Philippines is on track to meet growth targets and has secured rating upgrades from international agencies.”

In a separate report, BPI Asset Management agreed that investors looking for bargains could help lift the domestic market.

“Global markets were downtrodden [last] week amid continued worries over the Fed slowing its bond purchases and disappointing economic data points,” BPI Asset Management said. “For the week ahead, we expect markets to trade sideways with a slight upward bias on bargain-hunting following the substantial declines [last] week.”

BPI Asset Management noted that investors were more cautious this time around, especially with the Federal Open Market Committee set to meet on June 18-19.

“Some of the Fed officials have motioned that they are open to slowing down the QE [Quantitative Easing] program as early as the upcoming meeting,” it said.

COL Financial Group also advised clients to trade with caution during the current rebound, citing technical indicators.

“So far the ingredients to this rally are very few as a number of technical signals still stand against us,” COL Financial said in a June 7 report. “Many technical indicators point out that the corrective process is still in place.” Miguel R. Camus