Philippine stock market hit all-time high

Share prices are likely to consolidate in the near term with some profit taking following last week’s wave of buying that hit the composite index to another record high.

 “After finally breaking the psychological 5,000 resistance level, we may see the market taking a breather with some traders likely to take profits from the current run to record highs,” says AB Capital Securities.

 “The market does look expensive at 17.8X PE, which translates to an earnings yield of 5.6%.  Geopolitical concerns in the Middle East could be used as an excuse by profit takers to be more aggressive,” says AB Capital.

 Despite such concerns, AB Capital believes that the pullback would be minimal as so much liquidity are still on the sidelines, waiting for opportunities to come in.  

 “We recommend accumulating on dips with emphasis on banking issues like Metropolitan Bank and Trust Co. (MBT) and Security Bank Corporation (SECB).  On the more defensive issues, we see opportunities of laggards like First Philippine Holdings (FPH) and Energy Development Corporation (EDC),” says AB Capital.

 BPI Securities noted that the bourse once again landed to its new all-time high closing at above 5,000 level after Monetary Board policy slashed its interest rate by 25 basis points.

 Value turnover slightly declined by P1 billion to P7.1 billion with net foreign buying of P525 million.

 The most active traded stocks were AGI, PLDT, MPI, DIZ, AP, DMC, Ayala Corp. and Metrobank. Advances outnumbered declines 96 to 66 while 38 were unchanged.

 Week on week, the PSEi advanced 123 points (+2.46%) buoyed by better corporate earnings and the entry of more foreign funds.

 The continued upswing of the local market was buoyed by another cut in interest rates locally and hopes of a ratings upgrade.

 Local shares surged with the PSEi moving above the critical 5,000 level for the first time ever. 

 AB Capital noted that investors’ sentiments were also boosted by the release of strong 2011 corporate earnings and anticipation of sustained growth this year. 

 “Another positive driver for the market last week was Moody’s Investors Service comment that the country is now eligible for another credit rating upgrade.”

 “The country’s top finance officials recently provided rating agencies with an update on the country’s economic developments and concluded that the country is underrated.”

 “Among the major area of strengths identified were the government’s improving debt and revenue ratios, which was mainly attained through the Aquino administration’s continuing efforts to enhance tax administration.”

 “Going forward, the rating agencies are upbeat on the government’s aggressive push for reforms in sin taxes as it is seen to pull up the economy by as much as 1.3%,” says AB Capital.