Economic outlook explained
The Stock markets have never been trusted by those who are really conversant with their working as far as their behavior is concerned; the best of stalwarts who consider themselves master of the markets also take a tumble frequently even when the economic outlook looks bright.
Hence, it can safely be said that the markets spare no one.
The same is also true of the local stock markets which has dumped quite a few bulls and bears but, right now; it is stated to be in the beginning of a phase of stability since it is considered to be going through a period of consolidation which is described as a corrective in nature.
Hence, it can be said that this, the second semester bodes well for the stock markets but, COL Financial a reputed online house of stockbrokers was apprehensive that previously uncharted territories were being approached by the main barometer for the stocks was seen cruising along smoothly and would likely explore the level of about 8400 by the coming year.
This was disclosed by the Chief Technical Analyst of COL, Juan Barredo while briefing a group explained that the system of the stock markets has several inbuilt mechanisms which are automatically triggered by the movements of the market indices; in this case, he said, the PSEi trend-line had sunk below its trend-line of seven months.
The safeguards in the system are there to improve the economic outlook.
This resulted in the triggering of a built-in safeguard due to which the PSEi went into the corrective consolidation mode; the activation of this defensive step would be making rallies regularly; these rallies will include some short-term rallies which may prod the figures in the region of 7950 to 8055. However, he also cautioned that there may be a real chance of the PSEi may soon breach the all-time record of 8136 before the current year is over.
The triggering of the safety mechanisms can sometimes be accompanied by unpredictable responses.
Also, speaking on the occasion, April Lynn Tan, the Head of Financial Research at COL, added that there is likely to be a dampening of the market sentiments due to the bombing in President Duterte’s home turf Davao City which forced the government to declare a state of lawless violence. She also added that this impact would be only temporary and there will not be any long-term effect unless such incidents become more frequent.Thus, the economic outlook will continue to be encouraging.
The mention of the impacts of six months was a bit cautious but she emphasized that the overall growth of the country’s economy outlook was a delightful result. The main advantage that the country got was from the United Stated Federal Reserve did not raise the interest rates; otherwise, the flow of funds would have been curtailed substantially since the emerging markets like the Philippines would have suffered a glut.
The expectations at the beginning of the year were that the US Federal Reserve would raise the interest rates about four times in a year but this did occur; hence, the belief now is that they may not raise the interest rates this year, or, maybe once at most.
The sentiments expressed by April Tan were clear when she averred that the Filipino economy in general and the stock markets in particular were expected to remain buoyant in the coming six years at least under the present Duterte administration.
This positive outlook is also because the Aquino administration had provided them a good financial foundation since their balance sheet was excellent; additionally, there was a veritable list of infrastructure projects that were to be executed under the Public Private Partnership (PPP) projects.
It is stated that, out of the 19 such projects, five projects were still to be approved by National Economic and Development Agency (NEDA) while another 14 were at the stage of bidding.
Moreover, the Duterte administration also made out a blueprint of an ambitious 10-point socioeconomic agenda that comprised of some serious action-oriented schemes which exhibited the action plan that was projected for continuing the spurt in growth during the previous government; this is another reason why the economic outlook is better.
She also informed those present that the hot favorite of her organization, COL was the promise to raise the spending on infrastructure projects to at least 5% of the Gross Domestic Product (GDP).
She went on to add that the year 2015 saw a majority of the Filipinos reach the age of working while there was a spurt in the growth; this demographic advantage is likely to be in place for at least 40 years to come or until the year 2055, she said.
With the advantages of having an economy driven by domestic forces, the Philippines is less likely to be vulnerable to or to suffer adversely due to developments outside its shores; there was also a very big room for growth investments arising from the rungs of society which was an advantage that the Philippines had over other regional entities in South east Asia.
But, she cautioned that the possibility of vulnerabilities due to short-term corrective responses was very real; moreover, the country’s credit rating was also at a risk of being downgraded since cutting taxes and simultaneously increasing spending on infrastructure might pose a problem if the deficit of budget spirals out of control.
Simultaneously, the valuations had lost their charm, she said; that was obviously a result of over-investment by investors to the tune of more than 20 times of what they were likely to earn in the current year.
Moreover, she cautioned that even if the PSEi does touch the figure of 8400 before the year-end, it might not give proportionate profits to the investors; then, the market may suffer selloffs as poor financial results come up from the companies while the companies try to place their shares taking advantage of the inflated valuations of their shares.
The government change also causes a period of transition wherein the new administration assesses and takes hold of the reins of the various projects; this, Tan said, may slow down the initial rate of government spending but this was only a short-term effect of adjustments by the new government.
Tan said that the favorite stocks to pick, as per COL, were those that pertained to infrastructure, Consumer themes and Tourism related; in this context she also named the following companies that COL liked for the three areas as follows:
1. Infrastructure:
a. Metro Pacific Investment Corp,
b. BDO Unibank, and
c. Metropolitan bank and trust Co.
2. Tourism:
a. Ayala Land Inc,
b. Robinson’s Land Corp, and
c. Cebu Air,
3. Consumer themes:
a. SM Investments,
b. Century Pacific Foods,
c. Concepcion Industrial Corp, and
d. D & L Industries
Umrao singh umraoz.wordpress.com
Saturday, 17 September 2016
Written for: Lars-Magnus Carlsson www.thephilippinepride.com?utm_source=rss&utm_medium=rss
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