Stocks fell Monday, after President Rodrigo Duterte declared “a state of lawless violence” following a bombing in Davao City that left 14 people dead, but a brokerage firm said the benchmark index would resume its appreciation in the coming months.
The Philippine Stock Exchange index, the 30-company benchmark, fell 43 points, or 0.6 percent, to close at 7,764.05 Monday. Despite the loss, the bellwether was still up 11.7 percent this year.
The broader all-share index also lost 15 points, or 0.3 percent, to settle at 4,614.19, on a value turnover of P5.8 billion.
Six of the 20 most active stocks ended in the green, led by Vitarich Corp. which rebounded 12.3 percent to P2.47 and Calata Corp. which advanced 9.6 percent to P4.
Brokerage firm COL Financial Philippines said it expected the benchmark index to hit the 8,400-point level next year as the domestic economy would likely sustain its growth under the Duterte administration.
COL Financial vice president and head of research April Lynn Tan said in a news briefing the Duterte administration’s thrust to boost infrastructure spending would significantly boost the country’s competitiveness and attractiveness as an investment destination.
Tan said the current administration had a rich pipeline of infrastructure projects under the public-private participation scheme. In the pipeline are 14 PPP projects worth P459 billion and five projects for approval by the National Economic and Development Authority.
Consumer spending is expected to remain strong on proposed cut in taxes, sustained dollar remittances from overseas Filipino and robust growth of the business process outsourcing industry.
Tan said, however, the market would be vulnerable to correction over the short term on concerns that increased infrastructure spending and the plan to cut taxes could result in the ballooning of the budget deficit which would lead to a downgrade in the country’s credit ratings.
She said the PSEi also remained expensive with price-to-earning ratio still at 20 times the 2016 earnings.
“This makes the the market vulnerable to sell-offs assuming that companies come out with disappointing earnings results. It also increases the likelihood of share placement as companies take advantage of their high levels of valuations,” Tan said.
Tan said corrections would present opportunities for investors to buy stock at more attractive valuations.
COL Financial chief technical analyst Juanis Barredo said the current sideways trading in the market could last over the next four to six weeks after the PSEi recently broke the 7,850 level.
Barredo said the market’s retracement could be between 7,330 and 7,540.
COL Financial expects companies engaged in infrastructure, tourism and consumer to continue to do well.
Among its stock picks are Metro Pacific Investments Corp., Ayala Land Inc., SM Investments Corp., Cebu Pacific, D&L Industries Inc., Century Pacific Food Inc. and Concepcion Industrial Corp.