The Philippines "must prove itself" to the global investor community and post a gross domestic product (GDP) growth of at least seven percent, said Jose Vistan, head of research at AB Capital Securities Inc.
"We would want to show the world that Philippine fundamentals are solid so we can continue to merit investor attention. We are classified as an emerging market but we should be considered among the best," Vistan said.
The second-quarter GDP data will be released on Thursday. In the first quarter, growth came in at 7.8 percent, well beyond the upper end of the full-year target of 6-7 percent and the fastest in Asia.
Uncertainty over the Fed's tapering however has weighed on global markets, particularly on emerging markets. The Fed's $85-billion bond-buying program – the third tranche that has come to be called the third quantitative easing (QE3) – has been a key driver of equities rallies in the past several months.
The reduction of the Fed's stimulus relieves the downward pressure on US interest rates. Higher interest rates would attract money back to the US and out of emerging markets like the Philippines.
"The bias for fund managers is to lighten up on equities in general more so on emerging markets like the Philippines. There's nothing wrong with the Philippines. It's more of a liquidity concern," Vistan said.
"Restoring confidence on equities has been a difficult challenge as investors remain enamored with concerns over the Fed's decision on the future of QE3. While these concerns are not entirely unfounded, we believe that to a certain degree, there has been an overreaction in the context of ignoring the domestic fundamentals – as well as the positive trend in listed firms' earnings through the first six months of the year," said Jun Calaycay of Accord Capital Equities Corp.
Asian shares mostly increased Monday on fading expectations of a complete phase-out of the Fed's economic stimulus after data on new home sales dropped, raising concerns about the strength of the recovery in the US housing market. Last Friday, the Dow Jones Industrial Average rose 46.62 points, or 0.3 percent, to 15,010.36.
"The positive spin in Asian stocks that opened this week's trades should rub off on the local market which has been closed in the four of the last six days," said Calaycay.
Minutes from the Federal Open Market Committee's (FOMC) July meeting showed US central bank officials were broadly supportive of chairman Ben Bernanke's plan to start tapering its monthly asset purchases this year if the economy continues to improve in line with expectations. This prompted investors to dump equities, dragging the local market by 5.59 percent in the two-day trading week.
"We expect the local equities market to trade with an upward bias next week. With the market down 6 percent for the last two days, we expect some bargain hunting to set in," said BPI Asset Management.
However, selling pressure on index heavyweight SM Investments Corp may continue until month-end after its weighting in the MSCI Philippine Index has been reduced from around 15 percent to approximately 7 percent, effective August 30.
Likewise, the peaceful nature of the mass action in Luneta should have "little negative effect" on the market when trades resume Tuesday.
"In fact, this should breed confidence even more as a maturing population keeps good governance and transparency alive -- a paramount concern among investors and businessmen," said Calaycay.
source: interaksyon.com
