Despite the market’s current weakness, BDO Securities Corporation expects the Philippine Stock Exchange index (PSEi) to surge to 7,700 by the end of the year, based on an average earnings growth estimate of 15 percent.
The BDO Unibank Inc.’s stock brokerage is urging investors to take advantage of the current weakness in the stock market to load up on cheap stocks and not to be swayed by superstitions such as the belief that it is not a good time to make investments during the Chinese Ghost Month.
“Ghost Month”, an annual observance believed to bring bad luck, is often associated with cautious behaviors and superstitions that supposedly affect financial markets.
“Making investment decisions based on sound research, diversification, and long-term goals are crucial, regardless of the time of the year,” said BDO Securities Assistant Vice President and Head of Online Sales, John Michael Raz.
He noted that the 30-stock PSEi has generally exhibited weakness in the month of August, which happens historically 60 percent of the time.
To date, the support has been established at the 6,350 level with the market trading at the 6,350 to 6,750 range currently.
"This range may persist if participants continue to stay on the sidelines due to lack of catalysts. There's really no rule against buying in the month of August," he said.
Instead of being "scared" of trading at this time, Raz pointed out that investors should instead consider the ghost month as an opportunity to go bargain-hunting.
"While historically weak, investors should take it as an opportunity to buy the dips and initiate positions in their favorite stocks. For a lot of investors, they see weakness as an opportunity to even improve their cost," he stressed.
For sectors to look out for with strong growth potential, Raz listed financial and power sectors with a dash of opportunistic buying of select conglomerates.
"We suggest investors look at sectors that can sustain earnings growth. We continue to prefer the financial sector on the back of still healthy loan growth and improving lending margins,” he said.
Rax added that, “we are also bullish on the power sector which is seen to benefit from inelastic power demand and higher spot market prices. We also like conglomerates with consumer-centric portfolios that benefit from the country’s economic resilience."
BDO Securities further stressed that a down or flat market still provides investors with decent returns and should not be a reason for them to stay on the sidelines.
"For active investors who like trading, a flat market offers an opportunity to trade in and out of a well-established range--buying near support and selling at or near resistance,” said Raz.
He stressed that, “a down market doesn't mean there are no opportunities to make decent returns. Rather, you just need to be more selective of the stocks to buy and manage your expectations in terms of returns."
"For investors with a long-term view, our comprehensive research coverage provides up-to-date fair value estimates. This aids our clients in identifying opportunities at bargain prices," he said.
BDO Securities regularly provides guidance to investors through its Weekly Wrap and Technically Speaking articles, among others, using a sound investing strategy or trading plan which caters to the individual's objectives and risk preferences.