COL: Bull run not over for PSEi

Despite the recent plunge in share prices, top local online brokerage firm COL Financial believes the Philippines is just suffering from a major correction and is still on a long-term bull run.

While the local market is weak due to several factors locally and globally, COL vice president and research head April Lee-Tan said “we remain confident that the Philippines will eventually bounce back and stay in a bull market over the longer term as none of the characteristics of past bear markets present today.”

She noted that “there is also a strong likelihood that we have already seen the low of this correction based on the magnitude and duration of major corrections in the past.”

Global stock markets have taken a hit due to concerns over a devaluation of the Yuan and a weaker Chinese economy, contagion from a sell-off in Asian stocks (Thailand and Indonesia), and disappointing growth in the local economy and corporate profits.

Tan said local mining firms are suffering from low metal prices while revenues of gaming companies are not shooting up as expected, both due to the weak Chinese economy.

On the other hand, consumer stocks are reeling from intense competition while power firms are expecting lower earnings.

However, Tan noted that the Philippine stock market remains attractive over the long term because liquidity conditions remain favorable for stocks and because the Philippines has one of the best fundamental long-term stories globally.

“While the stock market could remain weak and volatile in the short term, investors should take advantage of current market conditions to accumulate stocks at cheaper levels as the long term outlook remains attractive,” she said.

Tan advised investors to “focus on quality larger capitalized liquid stocks trading at attractive valuations as these are expected to lead the market’s eventual recovery.”

She said that while there is a small risk that contagion will push the Philippine Stock Exchange index into a bear market (marked by a 20 percent decline), “any possible bear market is expected to be short and shallow.” (JAL)