Shares to rise on economic recovery prospects

STOCKS are expected to trade higher this month on the back of recovery prospects as the economy reopens following a decline in coronavirus disease 2019 (COVID-19) cases.

The bellwether Philippine Stock Exchange index (PSEi) gained 109.68 points or 1.51% to close at 7,361.65 on Monday, the last trading day of January, while the broader all shares index went up by 48.12 points or 1.24% to end at 3,904.20.

Month on month, the index climbed 239.02 points from its 7,122.63 finish on Dec. 31.

Local financial markets were closed on Tuesday due to a special non-working day in celebration of Chinese New Year.

This month, analysts see the market moving higher following an easing in mobility and travel restrictions, which would allow the economy to reopen further and boost spending.

“The local stock market could trade higher in this month as the economy further reopens towards greater normalcy, with the Alert Level eased to 2 from 3 for Metro Manila and other areas with lower healthcare utilization rate,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a Viber message.

Aside from putting the National Capital Region (NCR) and seven provinces under eased restrictions, the government will also allow COVID-19 vaccinated tourists from visa-free countries to enter the country starting Feb. 10.

Mr. Ricafort said the campaign period for national candidates, set to begin on Feb. 8, will partly set the direction for the local market this month.

First Metro Investment Corp. Head of Research Cristina S. Ulang said if the government’s plan to scrap the alert level system and impose granular lockdowns instead happens soon, the index could test the 7,500 levels near term.

The National Economic Development Authority on Monday said it is studying the elimination of the alert level system as the government should already begin shifting to an endemic mindset as a part of an exit plan from the pandemic.

Meanwhile, Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said growing inflation concerns could cause volatility in the market.

World stocks climbed higher on Monday as investors digested new optimism from the US Treasury’s top economist that inflationary pressures should ease in 2022 due to weaker demand for goods, easing supply bottlenecks and a receding coronavirus pandemic, Reuters reported.

Lunar New Year holidays made for thin trading conditions in Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.11% higher.

On Wall Street, the Dow Jones Industrial Average rose 1.17%, while the S&P 500 gained 1.89%. The tech-heavy Nasdaq added 3.41%, but has borne the brunt of selling and is down 14% from a record peak last year.

RCBC’s Mr. Ricafort put the PSEi’s next important resistance at the 7,385-7,400 levels. — M.C. Lucenio with Reuters