Weak sentiment could test rebound – analysts

Title Philippine Stock Exchange Index's Fragile Sentiment Can Weakness Rebound or Fall Back?

The Philippine Stock Exchange index (PSEi) has shown signs of recovery, but analysts remain cautious about its sustainability. The benchmark index closed at 5,997.13 on Friday, up 7.39 percent week-on-week, although it still remains down 8.14 percent since the start of the year.

Philstocks Financial Inc. research manager Japhet Tantiangco noted that while the market's recovery is encouraging, the broader trend is still considered to be on a downtrend. To cement a rebound, he said the index needs to establish a high exceeding its previous one at 6,141.87 and a low shallower than its last one at 5,584.35.

The PSEi remains undervalued, trading at a price-to-earnings ratio of 10.0x, far below the five-year average of 17.3x and the 17.9x for the region. The latest financial results have been satisfactory, with 23 out of the 30 index members posting bottom-line growth.

However, Tantiangco warned that the market needs fresh catalysts to continue gaining. Without such, we may see the market succumb to profit taking again, especially since concerns over corruption issues and the local economy's outlook are still weighing on sentiment.

Online stockbrokerage firm 2TradeAsia.com echoed the need for caution, pointing to weakening odds of a December US Federal Reserve (Fed) rate cut and an extended higher-for-longer global rate environment. While third-quarter corporate earnings showed growth, momentum has softened as sector dispersion widened.

On the other hand, Trading Edge chief investment strategist Ron Acoba noted that the index has benefited from renewed bargain hunting and political developments. However, he cautioned that the index may again encounter selling pressure as it approaches its medium-term downtrend line near 6,000.

In conclusion, while the PSEi's recent recovery is encouraging, analysts remain cautious about its sustainability. The market needs fresh catalysts to continue gaining, and any signs of weakness could lead to a rebound or a fall back. A closer examination of these factors will be crucial in determining the direction of the Philippine stock market.

Keywords Philippine Stock Exchange index (PSEi), sentiment, stock market, financial analysis, investment strategies, Philippines economy

Edward Lance Arellano Lorilla

CEO / Co-Founder

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