Aug 242014

MANILA, Philippines – The Philippine Stock Exchange index (PSEi) is set to test the 7,200 level this week as investors await the announcement of the Philippine economy’s second quarter performance.

Analysts believe that the country’s second quarter gross domestic product (GDP), which is expected to grow at a faster pace compared to the 5.7 percent expansion in the first quarter, can make or break market confidence in equities in the succeeding weeks.   

“This will be the turning point on whether the PSEi can sustain its advance toward 7,200 or serve as the platform for a near-term correction,” said Accord Capital Equities Corp. analyst Justino Calaycay Jr.

The bellwether index finished strong last week after a four-day rally, closing at a fresh 14-month high and piercing through the 7,100 level for the first time this year.

“Trading activity has picked up significantly with value turnover picking up towards the tail-end of the Chinese ghost month. Earnings have definitely recovered off the first quarter weakness. They are not as stellar as we would probably want them to be – sufficient to justify the PSEI’s foray into the 7,000-7,200 band. But, ceteris paribus, expectations that the index will head even higher in the balance of the year appear justified,” Calaycay said.

F. Yap Securities investment analyst Jason T. Escartin said optimists dominated last week as political tension in Eastern Europe & the Middle East receded.

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“Any indication at the political front that would show willingness of conflicting groups to go through dialogues will be receptive to players.  Nonetheless, volatility should still be anticipated, given the unpredictability of the outcome of talks,” Escartin said.

Locally, Escartin said participation during the four-day trading week improved 8.5 percent at P9.4 billion as economic planners forecasted a stronger second quarter GDP due to higher manufacturing output, remittances and export growth.

Escartin pegged the immediate support at 7,000 to 7,020, and resistance at 7,200 to 7,300.

“Several are aiming for earnings growth angle for 2015, apart from positive corporate news that are expected for the remainder this year.  Revisit stocks likely to further surprise expectations, especially towards the fourth quarter. It might be prudent to work within a tradable range, by positioning on dips & locking-in gains on the plus side,” Escartin said.

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