Sentiment at local stock market remains strong


Sentiment at the local stock market is still seen to be buoyed by expectations of a rate cut although some stocks may be vulnerable to profit-taking following recent gains.

“We continue to see a build up in positive momentum for the local bourse as it extends its rally to a fourth straight week. The local market has also gotten past the 6,700 level which was previously considered as a resistance,” said Philstocks Financial Research Manager Japhet Tantiangco. 

He noted that, “With the four week rally, we may see some pull backs next week as traders book profits. However, at its current level, the local market is still deemed to be fundamentally undervalued. Hence, long term investors may also take positions next week.”

“The market could still be able to post gains next week with optimism driven by hopes of a rate cut by the BSP soon and anticipation of second quarter corporate results. The local currency, if it strengthens further against the US Dollar and Wall Street, if it continues to post record performances, are also expected to provide aid to the bourse,” Tantiangco added.

Online brokerage 2Tradeasia.com said The PSEi's upward momentum remains unimpeded for the fourth straight week… Sustaining this uptrend amid still relatively anemic turnover is likely going to be the theme du jour of July trades.”

“Relatively strong year-on-year results is expected from our monitored sectors, particularly in banking, power, and property. The short of it is that positive earnings plus central bank policy decisions in August should provide near-term propellants for local equities. 

It noted though that, “The PSEi made a stopping point just a touch south of a strong resistance point in 6,800-it would be a relatively tall order to break this level one month after hitting YTD low but, so far, the macro backdrop and corporate fundamentals are backing lofty ambitions towards 7,000,”

For stock picks, both Abacus Securities Corporation and COL Financial are recommending Cebu Pacific to clients after it disclosed a restructuring plan to cut down and eventually eliminate its deficit.

Abacus said “this should lead to the company being able to declare dividends. The dividends, however, will be coming first through CEBCP in order of priority over the common shares. 

COL said “we see this restructuring as a positive for CEB since the airline can start accumulating retained earnings again which may ease concerns on its dividend policy moving forward. However, before the company can payout dividends, it must first compensate for its cumulative preferred dividends.”