BUSH VISIT EXPECTED TO STRENGTHEN US-RP ECONOMIC, SECURITY PARTNERSHIP
MANILA, OCTOBER 20, 2003 (STAR) By Zinnia B. Dela Peña - With the successful visit of US President George W. Bush last Saturday, the local stock market might extend its run-up although analysts still caution investors against taking an overly aggressive dive into the market.
Analysts said President Bush’s visit to the Philippines, as well as ongoing trade discussions within the Asian region, could still fuel some buying interest in the local market as this is expected to boost the country’s image abroad.
Stocks have been moving on a hot streak for the past several weeks, marking new highs due to a host of positive domestic and overseas factors. Last week, the Philippine composite index reached a high of 1,384.43, its first close above 1,380 since April 2002. Shares were primarily driven by Wall Street’s bull run with both the Dow and Nasdaq indices recording new highs.
Indonesian terrorist Fathur Roman Al-Ghozi, a senior leader of the Jemaah Islamiah group and one of the most wanted men in Asia, was killed in a shoot-out in North Cotabato, Mindanao. Al-Ghozi, who admitted responsibility for the Rizal Day bombing in Dec. 2000, escaped from his detention cell in Camp Crame last July.
The market ended last week in the green, closing up 22.13 points or 1.6 percent week on week to 1,367.33.
Analysts said President Bush’s visit is expected to strengthen the US and Philippines’ partnership on economic and security issues. The US is the Philippines’ top investor and export destination.
In a report, AB Capital research head Jose Vistan said: "The visit has been labeled as symbolic and substantive. A visit of the head of the word’s most powerful nation is a gesture of confidence on our country. This should
help attract fresh investments and business opportunities to our country."
Vistan said portfolio investments have, in fact, been flowing back to Asia, and the Philippines has also been a modest beneficiary. On a year to date
basis, the country’s net foreign portfolio investments have risen 136 percent year-on-year to $447.2 million from $189.7 million recorded in the same period last year.
Last week, the Philippine government went back to the international bond market and was able to raise $1.05 billion, enough to meet its financing
requirements for the rest of the year and pre-fund part of its 2004 budget. The offer was warmly received by international fund managers despite a recent downgrade on the country’s credit ratings outlook.
Vistan said the market, though, may encounter a technical correction this week as the hype related to the Bush visit dies down. "The market is overdue for some profit-taking from a technical standpoint. However, we believe that selling will be limited to certain names and sectors. We will see a lot of reluctant buyers and unwilling sellers," he said.
He said players will continue to consolidate positions ahead of keenly awaited third quarter earnings results.
"Investors have pushed most stocks to their 52-week highs in recent days as they become more confident that quarterly earnings will be better-than-expected. The market could correct sharply if expectations become too high and companies don’t meet them. Earnings should be good, but a more important question is: Will the recovery be sustainable going forward and will revenue growth and strong earnings continue through next year?" Vistan said.
Another issue that would continue to hound market players in the short-to-medium term, would be political risk issues, especially as the May
elections draw closer.
In its weekly online market outlook, RCBC Securities said while investors are slowly pricing in the negative effects of the political sniping that
is expected to escalate, there would always be uncertainties that investors would consider.
"Right now, the major concern among market participants is the credibility of the elections and whether the electoral process would be carried out without massive fraud and peace and order problems," it said.
Aside from the political problems, investors would also be watching how other international markets fare in the coming weeks, RCBC Securities said. Analysts said the Phisix’s resistance level at 1,380 while support is at 1,330 this week.
Reported by: Sol Jose Vanzi
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