‘Deep consolidation period’ for Philippine equities

Philippine equities are expected to go through a “deep consolidation period” in the short-term on the heels of the recent pullback from all-time highs, First Metro Investments Corp. (FMIC) and the University ofAsia and the Pacific (UA&P) said in a new rep

Out of the 16 trading days in February, the market closed in the red for 10 days.

PSEi’s ongoing declines are possibly “leading investors to sustain the trend and the low spread between earnings yield and 10-year Tbond rates suggest a deep consolidation period soon,” FMIC and UA&P said in the February 2018 issue of “The Market Call.”

The market is in an overbought position given its “elevated "price-earnings (PE) ratio of 23.6 times as of endJanuary.

“Investors must try to avoid getting whipsawed due to recent developments,” according to The Market Call.

The benchmark PSEi has been treading a losing streak this month, dropping to the 8,400 level on Friday— its lowest since Dec. 14, 2017— weighed by concerns about interest rate hikes in the US.

It soared to record highs above the 9,000-leve l to reach record highs in January.

Data collated by FMIC and UA&P showed foreign funds bought P90.259 billion of shares in January and sold P88.058 billion for a net buying position of P2.200 billion.

“After a roaring start by notching six new records to hit an all-time high of 9,058.62, PSEi closed January at 8,764.01 but continued to falter into the first days of February,” the report said.

“US’s DJIA soared by 5.9 percent in January, only to be followed by a reversal early in February that erased 2018 gains and started a global selloff which affected PSEi,” it said.

“The abrupt pause to the party suggests a deep consolidation period ahead,” The Market Call noted.

FMIC earlier said it expects the PSEi to carve a new record high of 9,400 this year. —

GMANews