Rough waters ahead for local stocks amid ‘a lot of countervailing forces’

LOCAL STOCKS may continue sailing through rough waters toward the first quarter of next year — at the least — amid uncertainties nagging the market, the head of The Philippine Stock Exchange, Inc. (PSE) said yesterday.

“The first quarter seems to be quite volatile; there are really a lot of countervailing forces at work,” PSE President and Chief Executive Officer Hans B. Sicat told reporters late Wednesday, saying the main index will likely trade between 6,900 and 8,500 next year.

“We’ll probably be anywhere from where we are right now — around 6,900 — all the way up to 8,500,” Mr. Sicat said.

“It’s hard to say because there are so many variables right now that are going in opposite directions.”

The PSE index, consisting of the country’s 30 biggest stocks, has been trading below 2015’s 6,952.08 finish. On Thursday, the gauge settled 1.05% lower at 6,855.31 after the US Federal Reserve flagged more rate hikes next year.

“I think one of the positive things for 2016 is that, on the exchange, even as most of our transactions got done only in the second half of this year, there’s still a lot of fund-raising and a lot of companies were able to come to the market which still shows there’s liquidity in the market,” Mr. Sicat noted.

No company debuted on the PSE until the sixth month. Golden Haven Memorial Park, Inc. took the lead, followed by Cemex Holdings Philippines, Inc. in July, Pilipinas Shell Petroleum Corp. last month and Shakey’s Pizza Asia Ventures, Inc. yesterday.

Mr. Sicat cited uncertainty over the timing of further rate hikes in the United States among this year’s major sources of market volatility that kept the PSE from hitting its target of facilitating P200 billion worth of fundraising activities.

“We think that 2017 will continue to be or we’ll start off being a highly volatile year. A volatile start to the year I could see and I think we’ll figure out how events will develop in January and February before one can give a more educated guess as to where the market will be,” Mr. Sicat said.

The PSE expects the daily value turnover to increase to an average of P8-8.2 billion from about P7.5 billion. The index, however, can supposedly trade within a wider range given the unpredictability of policies across the globe.

“The biggest challenge is it’s so hard to predict exactly what will happen. It’s very different from previous years when you would have an idea where let’s say governments and maybe even global central banks are signaling very clearly what they will do,” Mr. Sicat said.

“The world, for example, two years ago, [ was talking about] quantitative easing, right?… No one was talking about shutting trade flows or even capital market flows,” he recalled.

“Now, you don’t know which side is going to win this debate and that’s the biggest challenge.”

For instance, investors are waiting to see whether US President-elect Donald J. Trump will indeed adopt protectionist policies.

“I think the issue is that you have competing… economic philosophies at work now and the signaling… from the US is that it’s going to be more inward-looking, perhaps even more protectionist,” Mr. Sicat said.

This, PSE’s head noted, would be “very much at odds with what the globe has been seeing over the last few years — even decades — about trying to have regional integration, more open borders, trade for both goods and services.” —