Shares seen to rally ahead of Q2 earnings reports
By Arra B. Francia
Senior Reporter
LOCAL SHARES are seen to firm up this week as companies are expected to report good earnings results for the second quarter.
The bellwether Philippine Stock Exchange index (PSEi) dropped 0.76% or 61.56 points to close at 7,990.20 on Friday as investors decided to take profits after the main index posted gains for most of the week.
On a weekly basis, the PSEi added 0.08% or six points thanks to a 1.53% increase in industrials and 1.45% uptick in services. This offset the 1.97% slump in the mining and oil counter. Turnover slipped by six percent to P7.53 billion on a daily average last week, supported by average net foreign buying of P406 million.
“I am more inclined to believe that the market is going to rally as companies across the board are expected to post robust earnings in the following weeks and with economic fundamentals getting better and government spending picking up, we are going to see a pickup in economic growth,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.
The Bangko Sentral ng Pilipinas (BSP) will also have its policy meeting on Thursday. It is expected to keep policy settings steady after it cut interest rates by 25 basis points last May, on top of reductions to banks reserve requirement ratios (RRR).
“However, if they do reduce rates again [this] week, that may be an incentive for investors to increase positions in the market,” Mr. Mangun said.
Online brokerage 2TradeAsia.com also sees some upside for the market once second-quarter earnings results are out.
“Plotting our target price levels for core index anchored on net earnings estimates for 2019, the simulated level for PSEi would be at 9,070. We may consider upward adjustments based on second half prospects, post-announcement of initial semester results,” 2TradeAsia.com said in a market note.
The brokerage added that the BSP’s 50-basis-point RRR cuts for universal, commercial and thrift banks scheduled this month and July, higher infrastructure spending, and corporate capex rollout will support the PSEi moving forward.
“Specific sector premiums might be commanded, depending on merger and acquisition prospects, including approval of necessarily industry-related bills,” 2TradeAsia.com said, citing the implementation of real estate investment trusts and reclamation projects, among others.
Overseas, the company said investors may focus on the movement of oil prices as the Organization of the Petroleum Exporting Countries considers the continuation of supply cuts.
Mr. Mangun placed the market’s support from 7,700 to 7,880, with resistance from 8,000 to 8,140.
“The last two weeks may have been boring but the next two weeks are going to be interesting and I will not be surprised if we see this market explode to the upside,” the analyst said.
