PSE index breaches key 7,000-level
July 7, 2014
The lower-than-expected inflation rate announced by the government last week coupled by positive data in the US continued to buoy local share prices, pushing the Philippine Stock Exchange index beyond the psychological resistance level of 7,000 intraday.
Profit taking eventually pared gains with the PSEi closing just a hair below that level, at 6,999.10, higher by 36.82 points or 0.53 percent. Except for the mining and oil sector, almost all sub-indices advanced, led by the property and banking counters.
“The market’s rise to the 7,000 is a validation of the solid macro-economic fundamentals of the country and the confidence of investors in the Philippine economy. We are hopeful that this momentum will carry on until the end of the year,” said PSE President and CEO Hans B. Sicat.
BDO Unibank chief market strategist Jonathan Ravelas said “New highs on Wall Street helped boost local investor sentiment, pushing the index to test the 7,000 level.”
Trading volume was relatively heavy with 2.798 billion shares valued at P8.3 billion changing hands. Gainers swamped decliners, 114-74, with 42 issues unchanged.
“It is basically… we felt the fireworks in the US. There continues to be good news like jobs and trade data. It’s our budget’s partner so it would benefit us also,” said First Grade Finance Inc. managing director Astro del Castillo.
He noted that these reports gives the feeling that interest rates overseas will not go up so there is also less pressure for local regulators to increase rates.
“Regardless of all other factors to which the market’s seemingly unbridled advance to near-record levels are attributed to, the underlying motive force underlining the extension of the bull market to a fifth year is liquidity and interest rates,” said Accord Capital Equities Corporation analyst Justino Calaycay Jr.
Calaycay noted that, “although the index eventually settled below the 7,000-line at the close, there seems little doubt that the breather it took, driven mainly by profit-taking, is temporary. The strong positive breadth suggests momentum is intact and the levels reached today may be revisited, if not surpassed in the coming days.”
He pointed out that US markets are at record highs while other global indexes are treading multiple year peaks.
“While reductions in the stimulus, now totalling $50 billion, by the Fed and our own BSP’s increase of the SDA rates may be considered quasi-tightening, liquidity flow remains ample,” Calaycay said.
He said Europe is still on an accommodative track, in fact is seriously considering (despite a voice of concern from the IMF) a US Fed-style asset-purchase program.
China is likewise on an economic pump-priming track, keeping an easy money stance, if not directly injecting liquidity in financial markets and encouraging business activity.
Calaycay explained that “this has capped yields on fixed income securities, leaving investors with little options over the near-to-medium term but equities.”