PHL stocks may extend gains if catalysts hold

By Alexandria Grace C. Magno

PHILIPPINE STOCKS may extend their advance this week after the market staged a strong rebound and moved close to the 6,000 level, analysts said.

“Local shares rebounded this week and almost breached the 6,000 zone, as investors capitalized on multi-year low valuations,” online brokerage 2TradeAsia said in a note.

On Friday, the Philippine Stock Exchange index (PSEi) climbed 1.11% or 66.32 points to 5,997.13. The broader all-share index rose 2.5% or 83.5 points to 3,418.52.

Week on week, the PSEi gained 412.78 points from its 5,584.35 close on Nov. 14.

“The local market has shown signs of life last week, bouncing strongly on the back of positive narratives,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message. “However, technically, the market is still considered to be on a downtrend.”

“To negate its current trend, it must establish a high exceeding its previous one at 6,141.87 touched last Oct. 20, and a low shallower than its last one at 5,584.35 touched last Nov. 14,” he added.

Despite last week’s rally, he said the market remains undervalued. As of Friday’s close, the bourse was trading at a price-to-earnings ratio of 10x, below its five-year average of 17.3x and the regional average of 17.9x.

Latest financial results have also been encouraging, with 23 of the 30 index members posting bottom-line growth.

To keep bargain hunting active, Mr. Tantiangco said more positive catalysts must emerge. Without these, the market may slip back into profit taking, given persistent worries about corruption issues and the economy’s outlook.

He added that traders might also take cues from peso movements. An appreciation against the dollar could support sentiment, while a decline may weigh on the market.

On the technical front, Mr. Tantiangco said the PSEi ended last week above its 50-day exponential moving average (EMA). “Holding position above the 50-day EMA leaves the 6,000 resistance level as the next target. The market’s MACD (moving average convergence/divergence) line has crossed above the signal line, implying short-run bullish momentum. Major support is at 5,800,” he said.

Meanwhile, 2TradeAsia said near-term downside might be limited by holiday liquidity, the US Federal Reserve’s planned end to quantitative tightening in December, and typical year-end window dressing.

Still, it warned that global uncertainty calls for disciplined positioning in high-quality companies with strong balance sheets.

“Stay nimble as opportunities arise when sentiment overshoots fundamentals,” it said. The brokerage placed immediate support at 5,800 and resistance at 6,000, with secondary resistance at 6,100.