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Analysts: RP shares overbought; upward momentum achieved


The impact of corporate earnings is on the ebb, dissipating in a modest way the excitement in the market, but analysts are convinced that an upward momentum has been achieved despite the current overbought conditions of Philippine shares. "We are already through with earnings and will be entering a period of fewer supply of market-moving news," said AB Capital Securities Inc. in a report, pointing out that any correction will only be shallow as domestic fundamentals are "strong and are expected to stay bullish" during this mid-recovery stage of the economy. The Philippine Stock Exchange index ended the week at 3,593.6 points, gaining 124.08 points or 3.6 percent week-on-week. Friday's close put the index to its highest close since January of 2008. Momentum was driven by recently released corporate earnings results that proved to be "super ghost busters," said AB Capital. It said the upgrades in earnings expectations have led local equities to trade at "very cheap valuations." Apart from the strong corporate performance, AB Capital said "good economic indicators continued to show strength in the domestic economy." Money sent home by overseas Filipino workers reached an all-time high — $1.62 billion — in June as demand for skilled Filipino workers continued to grow. Economic managers are also looking at an upward adjustment of export-growth targets for 2010 from 20 percent to at least 25 percent. Likewise, July's deficit hit P32.7 billion, bringing year-to-date shortfall to P229.4 billion or 70.6 percent of the full-year target of P325 billion. "A stable macroeconomic environment is still envisioned by the economic team of [President Benigno Aquino III], downplaying concerns on the swelling deficit. It reaffirmed its commitment in improving tax collections," said Jonathan Ravelas, chief market strategist of Banco de Oro Unibank Inc., in a separate report. The market's momentum is happening despite its overbought conditions. "The [index] is already at its overbought levels. But any correction will most likely be minimal as trend forecasting oscillators are currently bullish," AB Capital said. "Such pullbacks can be used as an opportunity to buy for investors and bargain hunters," it said, pointing out that share prices need a pause to set itself up for a more sustainable run up towards the end of year. According to Ravelas, the week's close at 3593.6 points implies that the market has still some gas to test the 3600- to 3650-point levels. Key support still lies at the 3,400 levels, he added. —VS, GMANews.TV

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