Another PSEi rally in the offing, yet road is dark and foreboding

Local stocks could take their cue from upbeat Wall Street sentiment this week, giving a window of opportunity for investors to lock up recent gains.

Last week, the main-share Philippine Stock Exchange index (PSEi) gained 626.29 points or 10.7 percent to close on Friday at 6,465.13.

The index has rebounded by 2,425.98 points or 60 percent from its bottom of 4,039.15 in March. But as the worst of corporate earnings has yet to come and a number of economic challenges from the new coronavirus disease pandemic still on the horizon, there’s doubt on the sustainability of this run-up.

“The market showed a lot of resilience bouncing back from an intraday decline of as deep as 218 points on Friday. This indicates an underlying strength on the back of optimism that the economy could be on its way to recovering,” said PNB Securities president Manuel Lisbona.

Lisbona said that, for this week, the market looked poised to continue its climb due to favorable data from the United States.

The jobless rate in the United States improved to 13.3 percent in May from 14.7 percent in April. As such, the Dow Jones Industrial Index rose by 3 percent on Friday.

“We are expecting this positive sentiment to spill over to other markets in the next sessions and could encourage even more buying locally. While we do not discount profit-taking, this might be shallow or may not happen yet,” Lisbona said.

Manny Cruz, chief strategist at Papa Securities, added: “The stock market is the economy. The Philippine stocks are behaving as if the economy will have a V-shaped recovery. PSEi has skyrocketed by nearly 20 percent from its intra-day low of 5,396 on May 26 amid market optimism on a new norm.”

However, Cruz said his firm’s thesis was that the economy would have a U-shaped—or a long trough before making a recovery—trajectory, given the bleak prospects for sectors like restaurants, hotels, gaming, airlines and malls. —DORIS DUMLAO-ABADILLA