Analysts see stock market staying above 7,000 points

Trading at the Philippine Stock Exchange is expected to stay above 7,000 points this shortened trading week on investor optimism following the latest developments on COVID-19 vaccine candidates.

Financial markets will be closed on Tuesday to commemorate the feast of the Immaculate Conception.

“The PSEi bouncing back strongly to the 7,000 territory communicates optimism over the 2021 recovery and the much stronger 2022 back to normal scenario,” 2TradeAsia.com said.

The brokerage company, however, cautioned investors to temper their optimism with vigilance as developments on vaccine and government’s stimulus programs would continue to weigh on the market.

The vaccines, although available soon, cannot not be deployed yet until the second half of next year. The late delivery could prompt the government to keep current quarantine restrictions in the country.

The inter-agency Development Budget Coordination Committee has projected deeper economic contraction in 2020 due to the effects of the pandemic. It now expects the gross domestic product to contract by 8.5 percent to 9.5 percent this 2020, worse than the July estimate of 4.5 percent to 6.6 percent.

The DBCC expects the economy to recover in 2021, with GDP expanding 6.5 percent to 7.5 percent. The GDP in 2022 is expected to grow at a much faster rate of 8 percent to 10 percent.

Meanwhile, investors are anticipating another Monetary Board meeting this month. After a surprise rate cut in November, analysts said another 25-basis-point reduction in policy rates would boost business confidence and revive the domestic economy.

If another rate cut is implemented, analysts are expecting the market to further rally to the 7,300-to-7,500-point mark.

The benchmark Philippine Stock Exchange Index last week surged 5 percent, or 343 points, to 7,134 on hopes the vaccine for coronavirus would be available in the country by next year.

All sectoral indices ended in the green led by holding firms (+6.25 percent), property (+4.83 percent) and financials (+3.74 percent).

The average daily value traded dropped to P9.73 billion, while average net foreign selling eased to P590 million.

Meanwhile, investors pushed stock markets higher Friday with US equities ending at all-time highs as continued optimism over vaccines and signs of progress on new US stimulus offset worries about rising coronavirus cases.

All three major US stock indices finished at fresh records after European bourses also posted gains.  

Oil prices also climbed to nine-month highs following the latest production agreement by petroleum exporters.

The rally on Wall Street came even following government data showing the jobs recovery stalled, as US employers added just 245,000 new jobs in November.  

And though the unemployment rate dipped to 6.7 percent from 6.9 percent, the lowest since the pandemic struck, that was due to Americans leaving the workforce.

Noting that new COVID-19 cases are “raging” in the US, FHN Financial’s Chris Low warned that “job growth will be sluggish for the next three or four months, minimum.”  With AFP