MANILA, Philippines – The Philippine Stock Exchange index (PSEi) may hit the 6,900 level in 2014, according to online brokerage firm COL Financial, which cited positive economic developments being overlooked by investors.
COL Financial also said that the current sell-off in the market poses an opportunity to accumulate stocks at good prices. (READ: Where PSEi stands and what you should do)
“Due to low interest rates, stocks remain the most attractive peso asset class even though valuations seem expensive relative to historical average. Given the favorable long term outlook of the economy, we believe that the fundamentals will eventually catch up with valuations in 2015 assuming that PSEi remains unchanged for the rest of the year,” the company’s vice president and head of research, April Tan, said.
Expectations of reduced liquidity brought about by the tapering of the US Federal Reserve’s bond-buying program triggered the outflow of funds from emerging markets, including the Philippines.
Bad news locally, including the destruction caused by Typhoon Yolanda (Haiyan) and soft spots in the 4th-quarter economic numbers, also hurt investor sentiment.
But Tan said there is “an abundance” of good economic news being overlooked by investors.
“OFW remittances and BPO (business process outsourcing) revenues remain robust, while exports continue to rebound. And while foreign investors are hurting from the weak peso, the 3 sectors are major beneficiaries,” she said.
She added that foreign direct investments and the manufacturing sector are showing signs of strength and should remain robust. Prospects of higher interest rates are also already priced in, she noted.
For his part, COL Financial chief technical analyst Juanis Barredo said the PSEi remains on the bull cycle even as it has dropped significantly from its high of 7,400.
The PSEi closed at 6,106.03 on Tuesday, February 11, up 63.78 points or 1.06% from Monday’s finish.
Among COL Financial’s top picks for the year are EEI Inc., Megaworld Corporation, Philippine Long Distance Telephone Company, D&L Industries Inc., Ayala Corporation, BDO Unibank, Metropolitan Bank & Trust Company, Ayala Land Inc. and SM Prime Holdings Inc.
While banks and property firms are sensitive to rising interest rates, Tan said banking and property stocks have become attractive because of their low valuations.
COL Financial said that on a bear case scenario, the PSEi may end the year at 6,000, still slightly higher than the previous year. – Rappler.com
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