Investors eye GDP, earnings as market tests highs

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AFTER BREACHING record highs several times in October, investors will turn to more corporate earnings results and the country’s economic performance in the third quarter slated for release this month, which may determine the economy’s ability to sustain momentum moving forward.

Joylin F. Telagen, equity research analyst at IB Gimenez Securities, Inc. said sentiment of local markets will look forward this month to data on the country’s gross domestic product (GDP) in the July to September period and third-quarter earnings of listed companies, which will be released on Nov. 15.

Regina Capital Development Corp. Managing Director Luis A. Limlingan cited other potential catalysts this November, including the two-day Federal Open Market Committee policy meeting this week and the Bangko Sentral ng Pilipinas meeting.

“[And the] passage of TRAIN (Tax Reform for Acceleration and Inclusion Act), hopefully,” Mr. Limlingan said in a mobile phone message on Tuesday.

The bellwether index opened October at a new record high as investors anticipated the approval of the first package of the tax reform, which will overhaul the current tax code.

The Senate did not fail money managers after the former legislated the first part of the tax reform, which the Department of Finance expects to implement by next year.

On Oct. 17, the local bourse hit a fresh record high of 8,497.74, a surge driven by the confirmed death of leaders of the Maute group which besieged the city of Marawi that served as a battleground between government and the militant group for five months.

The Philippine Stock Exchange index ended the month at 8,365.26 points last Monday.

Justino B. Calaycay, Jr., Philstocks Financial, Inc.’s senior research analyst, said the main index’s current level marks about a 20% jump year to date.

“Yesterday, surely, we saw a lot of volatility coming back to the market. It is the period where the market started to correct,” Mr. Calaycay said in a phone interview on Tuesday.

“Moving into the final two months of the year, we’re looking for fresh equities as the markets try to pass the 8,500 level,” Mr. Calaycay added, also citing corporate earnings and the Philippines’ third-quarter GDP growth as this month’s main drivers.

“Should [economic data, corporate earnings,] come out better than expected, it could retest all-time high. And most likely end this year on positive note/all-time high,” said IB Gimenez’ Ms. Telagen in a text message, noting that investors tend to be more bullish during the last quarter of the year with the holiday season.

“The only thing that will probably temper sentiment in November is the series of holidays… These are going to affect at least trade volume from one jurisdiction to another,” said Philstocks’ Mr. Calaycay.

“Also, we’re looking at some political risk given that the ratings of the president have dropped,” Mr. Calaycay added. – Janina C. Lim