Market outlook: optimism amid uncertainties

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    For Luis Limlingan, managing director at Regina Capital Development Corp., opportunities remain encouraging for businesses in the gaming, banking and property sectors despite uncertainties the local stock market is facing.

    Companies in these sectors continue to retain the “growth prospects and defensive properties” which could help them weather the challenges in 2020, Limlingan said.

    Jun Calaycay, head of research at broker Philstocks Financial Inc., said the stock market is coming from an “indecisive” phase as it navigated through a “a mixed bag of narratives from local fundamentals to global noises.”

    The PSEi closed 2019 at 7,815.26, up by a measly 4.68 percent from its 7,466.02 closure the year prior.

    “Average value turnover was a little less lively by 0.68 percent at P6.26 billion. Foreigners sold an average of P40.1 million per session, narrower than the P2.60 billion daily net sales in 2018,” said Calaycay.

    Ramon Monzon, Philippine Stock Exchange president, earlier said the PSE managed to attract P95 million worth of fundraising through the equities market last year, down from P187.84 million the year before.

    Calaycay said on top of the investing sentiments’ dampener last year was the ongoing US-China trade war which people were initially thinking would have ended in the early part of last year.

    “Unfortunately, the talks collapsed in May as both countries resumed the escalation of tariffs bringing the market down by 5.70 percent to 7,475.16 by the middle of May. This was succeeded by a series of ups and downs in the Washington-Beijing negotiations that resulted in wild swings in the local market,” Calaycay said.

    “In early August, the US escalated tensions by calling China a currency manipulator which brought the market down by 4.47 percent to 7,766.75. Resumption of talks were agreed upon in the middle of August causing a 0.90 percent rise in the market. Then on the last week of September, the White House’s plans to curb US investments in China came out plunging the local market by 4.44 percent from late September to early October. After the erratic talks, finally, both countries agreed to a phase one deal by the end of the year,” he added.

    Locally, the market also grappled with the economic impact of the delayed government budget approval last year and the spillover effect of the high inflation environment the prior year, to see the lackluster growth of the economy at 5.6 percent in the first quarter, 5.5 percent in the second quarter and 6.2 percent in the third quarter, noted Calaycay.

    Bank of the Philippine Islands pegs the whole year gross domestic product (GDP) growth at 5.9 percent.

    As of last count, Philippine inflation was at 2.5 percent.

    The low inflation and GDP slowdown however gave the Bangko Sentral ng Pilipinas room to ease monetary policy with three 25-basis-point rate cuts and a 400-basis-point reduction in reserve requirement ratios, in order to perk up economic activity and in the process the local financial market, according to Calaycay.

    This coupled with noted activities in business like the Philippine offshore gaming operation in the property sector propped up the economy, which saw the property index overperform compared to the PSEi at 10 percent.

    For now, the market is still trying to digest the implication of the “utility contagion,” with Metro Manila’s water concessionaires Manila Water and Maynilad currently at the receiving end of the tirade of President Duterte over alleged “onerous contracts.”

    “This eventually led to the revocation of their contract extension from 2022 to 2037, raising regulatory risks which dragged the local market primarily those in the utility sector,” said Calaycay.

    “And that’s the 2019 Philippine stock market. We had ups and downs. We had opportunities and challenges,” Calaycay added.

    Online stock brokerage firm Mytrade.ph by Abacus Securities in an investors’ note said for the year, “GDP won’t be a game changer” as “it won’t be anywhere near the 7 percent-8 percent which was promised with the passage of TRAIN (Tax Reform for Acceleration and Inclusion),” the government’s comprehensive tax measure, though it will still be better than the “sub-6.0 percent growth” for 2019.

    Subdued business confidence meanwhile “point to unremarkable market EPS growth next year,” it said.

    Inflation however should remain benign in the first half of the year with chances to “rise continuously throughout next year,” it added.