Mixed forecasts for PH stock market

What seemed to be a fiery start for the Philippine stock market in January turned out icy cold by June, leaving investors perplexed as to what climate will the local bourse be in the remainder of the year.

With the first semester already in the books, a second half filled with a roller-coaster-type of action and drama will not come as a surprise to everyone.

“Volatilities were experienced by our market in the first half of the year largely due to external shocks mainly from developments in China and Greece. Overall, the impact is more contained given the limited exposure of our economy on these markets. The Philippines continues to enjoy stable macroeconomic fundamentals and this has helped buoy the market in positive territory despite the volatilities of late,” Philippine Stock Exchange (PSE) president and chief executive officer Hans Sicat said.

The Philippine Stock Exchange index (PSEi) was rocking and rolling at the start of the year, touching unprecedented territories early on.

President Benigno Aquino III himself joined the celebration in April as the PSEi closed above the 8,000 level for the first time.

“In April, we reached a high of 8,136 (intraday), up 12.5 percent from end-2014 level of 7,230. This came close to our year-end target of 8,200 for 2015. That early on, many stocks in our coverage had already reached 2015 yearend targets,” said Nisha Alicer, chief equity analysts at DA Market Securities, Inc.

By then, optimism was running at its all-time high as Aquino aired hopes of the possibility that the index may breach the 9,000 and even the 10,000 levels before his term ends.

Then from there— out of nowhere— the darling of investors started its descent, turning the once positive stock market atmosphere into cautious and gloomy.

“Obviously there have been three drivers outside the Philippines pulling our index closer to earth: the so-called Grexit, China’s slowdown and the US rate hike timing,” said Luis Limlingan, managing director at Regina Capital Development Corp.

“It was mainly the disappointing first quarter economic performance that dragged on what otherwise was an over performing market. First quarter earnings also fell somewhat below what was factored in in the original outlook at the beginning of the year. For our part, we then saw the measure hitting between 7,900 and 8,200 by year-end. As it turned out, we had already reached the upper limits of the range as early as April. It was a classic case of the fundamentals failing to justify the exuberance,” added Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

With the local stock market’s sharp rise and steep fall in the first six months of the year, analysts were left with mixed reactions as to whether or not like what has happened so far.

While some were disappointed, a number saw the light in the dark tunnel, applauding the local market’s resiliency in face of several storms that came along its way.

“Volatilities were experienced by our market in the first half of the year largely due to external shocks mainly from developments in China and Greece. Overall, the impact is more contained given the limited exposure of our economy on these markets. The Philippines continues to enjoy stable macroeconomic fundamentals and this has helped buoy the market in positive territory despite the volatilities of late,” Philippine Stock Exchange (PSE) president and chief executive o cer Hans Sicat said.

“When ranged against our initial outlook, we should be disappointed with the yearto-date performance. Note that at the end of June, the gains of as much as 12.4 percent at one point had dwindled to only 4.4 percent. By early July, all gains were wiped out in intra-day trades. However, given the actual results that has come out since then, I can say that the market has held up decently in the face of these challenges – both internal and external,” Calaycay said.

“The correction which began in April, confirmed by the lower high in May, was highly anticipated and coincided with market seasonality. Considering the quick run up of the market in the first quarter, we welcomed the correction as a better opportunity to position in the market. We came close to PSEi target 8,200 and actually hit full year 2015 targets for many stocks in our coverage. Corrections provide opportunities to investors to initiate or add position/re-position moving forward. Amid several external downside catalysts, we think the local market has been relatively resilient,” Alicer added.

The PSE said the benchmark stock index finished the first half of the year up by 4.6 percent compared to last year with the total market capitalization of 263 listed companies reaching at P14.6 trillion.

Trading has likewise been active, the country’s sole stock market added, as value turnover for the first half of the year grew by a double digit rate of 20.4 percent to P1.2 trillion from P993 billion in the same period last year.

In terms of foreign transactions, foreigners were net buyers at P16.59 billion, 63.7 percent lower than the P45.67 billion net foreign buying figure as of the first half last year.

“The growth of local participation in our market in the past years has helped keep liquidity at healthy levels. We hope that as the dust settles in the Eurozone, investors, especially foreign funds, will start revisiting their placements in the market and participate in the bright prospects it offers,” Sicat said.

Moving forward, analysts see the remaining months of the year to continue being challenging with several approaching headwinds which the country has no control over.

Externally, analysts said the continuing saga of the Greek crisis, China’s stock market woes or its slowing economic growth, and the unexpected lift-off pace by the US Federal Reserve would continue to haunt local stocks.

Within the Philippine shores, meanwhile, election-related uncertainties and corporate earnings performance are things to watch out for, analysts said.

“On the local front, the major hurdle is on the pace of fi scal spending. Improved growth for this area would be a major boost to sequel quarters’ GDP and reverse skeptics’ concern of slowdown in economic numbers. This is further compounded by the fact that the country is approaching an election year, which may lead to potential changes of priorities over the short- term. From an investor’s point of view, the big question is how will President Aquino’s potential successors ( regardless of party affi liation) build on reforms achieved in the previous administration’s term,” said Grace Cerdenia, research head at F. Yap Securities.

Despite uncertainties in the months ahead, analysts maintain their PSEi target consensus of reaching the 8,200 levels by the end of 2015.

Still, analysts see a rough road on the way of reaching that mark as spillover from the Greece talks and concerns on China lingering.

August will also be the well-known ghost month which has traditionally been one of the weaker periods both in terms of volume and stock movement.

“The attractiveness to global investors should be anchored by intact macroeconomic fundamentals, higher domestic consumption mainly due to election-driven spending and steadily increasing overseas Filipino worker remittances, and softening inflation,” Sicat said.

“The equity market has continued its uptrend as it had in the past six years. Notwithstanding the lower economic growth posted in the first quarter of the year, the country’s better-thanexpected performance in the last half-decade is not lost in the minds of investors. That said, the market is expected to continue luring in foreign capital this year as the Philippines is poised to remain as one of the region’s fastest growing economies,” he added.