RP market has strong fundamentals-analysts

By Honey Madrilejos-Reyes

Reporter

WHILE the Philippine Stock Exchange index plunged 7.92 percent at the close of trading Wednesday, analysts assured investors that the Philippine market is strong enough to withstand the setback primarily caused by external issues. “We have been waiting for that correction,” according to an analyst at RCBC Securities. “I think there was an overreaction over what happened in China and the comment made by former Federal Reserve chairman Alan Greenspan that the US economy might slip into a recession by the end of 2007.” The analyst said the Philippine market remains strong, because it remains backed by solid fundamentals. “The country is on track in achieving a fiscal balanced budget,” the RCBC analyst said. “The service sectors, especially the business process outsourcing, remains an attractive business here. Fundamentally, the country really has something it can rely on to get back.” The PSEi fell 263.84 points to 3,067.45 yesterday with the sectoral indices declining by five to 11 percent. It was the biggest loss the PSEi suffered in a single day, since the market capitalization method for computing the index was used in February 1990. Wednesday’s retreat also marked the biggest loss of the PSEi in nine years after it shed 8.33 percent off its value on January 9, 1998. “The negative sentiments were clearly caused by what happened in China,” said Ron Rodrigo, head of research at Unicapital Securities, Inc. On Tuesday, Shanghai’s benchmark index declined 8.8-percent due to concerns that the Beijing government was looking to do a cleaning on fraudulent stock market practices. “The [rumors] that China is going to impose a capital gains tax resulted in regional markets falling,” said S. Sharath, an analyst with MIDF-Amanah Investment Bank in Kuala Lumpur, Malaysia, where the benchmark index tumbled 2.8 percent. Investors in Asia were also spooked by comments Monday from former Federal Reserve chairman Alan Greenspan, who said a recession in the US was “possible” later this year. “Our economy is also dependent on the US economy, if there is adverse news, exports from our country is going to drop,” Sharath said. “I believe the [Philippine] stock market is based on the state of the economy,” Rodrigo said. “The fundamentals are firm given the policies the government has implemented over the past years. In fact, I think this is the best time for investors to beef up their participation in our market.” “I understand from government statistics that the country’s output of goods and services, as tracked by its gross domestic product, are expected to further grow,” said PSE president and chief operating officer Francis  Lim. “Prices of goods and services, along with interest rates, remain stable and exports continue to grow.” The timing is just not that good, as some listed companies that belong to the PSE benchmark measure have already filed their results for 2006, Lim said. “The numbers look impressive. The income in 2006 of index companies that have so far submitted partial unaudited financial reports went up on average by 27 percent from their level[s] in 2005.” While the market cannot help but absorb the repercussions from the continuing global reaction, Lim said the underlying concerns that jolted China’s shares are internal to that country. Analysts said that investors, who had sent the Shanghai benchmark index to a record Monday, dumped stocks Tuesday to lock in profits amid speculation about a fresh round of austerity measures from Beijing to slow the nation’s sizzling economy. (With reporting by AP)

 

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