Stocks likely to sustain upward momentum

Local stocks are likely to open higher after European leaders agreed on measures to stabilize the region’s banks in addition to directly recapitalizing them.

The Philippine Stock Exchange index ( PSEi) climbed 126 points or 2.51 percent last week to close at 5,246, mainly driven by mid-year window dressing activities.

Freya Natividad of stock portal 2tradeasia.com said the market is seen to continue its upward momentum, attempting to hit 5,350-5,400 following the euro zone leaders’ decision to inject 120 billion euros ($150 billion) of stimulus money into the troubled economies as well as better-than-expected US home sales.

Persistent fears about the euro zone’s future have restrained further advances for the world’s major stock markets, analysts said.

Natividad said investors will continue to monitor developments in the euro zone as the European Central Bank holds its policy meeting.

“Any ‘ implicit indication’ towards ‘ fiscal integration’, coupled by potential easing in monetary policies will provide a big sentiment boost for regional equities,” she said.

Other vital economic data expected to be released this week are US’ nonfarm payrolls, the Philippines’ gross international reserves as well as the country’s consumer price index.

AB Capital Securities’ Gregg Ilag said the PSEi’s valuations remain at a premium relative to historical levels. “The index trades at 18.09x earnings underpinned by the robust GDP and corporate earnings growth. Current levels do not appear very attractive in terms of risk and reward,” he said.

Ilag said the market may soon enter a correction phase given the strong resistance at 5,300 and oversold momentum indicators.