First half 2014 is consolidation time for PHL shares – COL Financial

^{University students monitor trading on the Philippine Stock Exchange in Makati on Friday. Photo by Reuters/Erik De Castro}

External concerns will continue to bear on the equities market, driving the Philippine Stock Exchange index (PSEi) into a consolidation phase in the first half of 2014, officials of COL Financial Group Inc. said Tuesday.

 

However, now is also a time to enter the market seize buying opportunities the main index dips into its  various support levels.

 

"In the first half of the year, we'll continue consolidation with the index trading roughly between 6,460 and 5,775," COL Financial vice president Juanis Barredo told reporters in a briefing.

 

"There are external events pressuring the emerging markets (EMs) in general, and those adjustments are forcing fund managers to pull some money out of EMs and keep money in very developed markets in the meantime," he said.

 

Barredo was referring to the "taper tantrums" every time the US Federal Reserve announces plans to cut its bond purchases and prompting fund managers to shift positions from EMs to developed markets.

 

Global markets experienced a series of sell-offs since May 2013, when former Fed chair Ben Bernanke indicated the US central bank will scale back its $85-billion bond-buying stimulus or quantitative easing (QE).

 

The US central bank started slicing its bond purchases by $10 billion in January and by another $10 billion this month.

 

QE is a measure to keep borrowing costs low and encourage investments, hiring and economic growth.

 

"When you have money moving in and out, it drives your index up and down," Barredo said.

 

But behind the Philippine market's present weakness are pockets of opportunities to accumulate stocks, assistant vice president and head of research April Lynn Tan said during the same briefing.

 

"Compared with other emerging economies, the Philippines is fundamentally stronger with its growing current account surplus," she said.

Local developments overlooked

 

Last December, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the current account surplus is projected at $11.1 billion for 2013 and at $10.4 billion for 2014.

 

Tetangco said “significant surpluses” will continue to relatively shield the domestic economy as well as capital and financial markets from global volatility. 

 

Tan said investors continue to overlook developments on the local front.

 

She noted the Philippine economy remains strong and will continue to expand in 2014 on the back of higher infrastructure and government spending, robust remittances and better business process outsourcing revenues.

 

Despite the impact of natural calamities towards the end of the 2013, the Philippine economy surpassed growth expectations when it grew by 7.2 percent driven by the services and manufacturing sectors.

 

Barredo said the consolidation is already priced into the market, noting this will allow more trading activity as investors employ a range trading strategies. 

 

"About 80 to 85 percent of what this market needs to pull down has already been accomplished. There could be a little bit more but we don't think it's going to be too much," he said.

 

The PSEi wiped out year-to-date gains carved in 2013 three times. The first was when the index fell to 5,789.06 on June 25. It dropped to 5,738.06 on August 28, and plummeted to 5,762.53 on December 12.

 

"This opens up a lot of buying windows for potential investors because this may be the opportunity they are waiting for," Barredo said.

 

"Whenever you see prices dip towards the lower end of that band, you look to accumulate. When it comes to a high point, you sell," he added.

 

On a bullish scenario, COL Financial sees the index reaching 6,900, coupled with a bearish scenario of 6,600. – VS, GMA News