Where is the stock market heading?
The best place for you to be in as an investor is that place where you have studied and researched well
THE Philippine Stock Exchange index (PSEi) welcomed 2014 with a bang! Opening the year at 5,923, our beloved market is now up 9.42 percent, beating several stock markets in the region. This year we have seen the likes of DMC, SCC, AGI, AEV, AP, DNL, JGS and URC, among others, take the helm and lead our market forward.
The question is, where are we now in the grand scheme of things and as an investor what should you do?
In terms of price:
1. We are back in the middle. When I say middle, we have significantly gone up from the lows of December 13, 2013, when the stock market index hit 5,767. However, we still have a long way to go if we want to go back to the highs of May 2013 of 7,392.
In terms of market sentiment:
1. We are in a short-term uptrend. Meaning, more buyers are now confident in the market than they were a few months back. More buyers coming in would definitely make our market go higher.
2. We have moved from a bearish market to bullish one. Breaking the 6,400 mark mean that our market moved from having more sellers to having more buyers willing to come in. If we stay above 6,400 it would be easier for the PSEi to hit 7,392 again in the next few weeks and months.
3. Value turnover has increased in the past few weeks. Last Friday’s value turnover was at P7.8 billion. This was better but still nowhere near the P10 billion to P12 billion we were posting last year.
4. If 6,400 proves to be a valid support, then 6,630 and 6,815 could be possible price ranges where selling may occur. If you do not see the market go higher than that, this would mean that the market could temporarily go down due to selling.
5. If 6,400 would not hold, the market may go lower to the following ranges: 6,192, 6,100, and 6,000.
In terms of fundamentals:
1. Our growth story is still intact. The Philippines is poised to zoom and grow in years to come. Nothing has changed. Sentiments change overnight but our growth story remains pumped and primed to grow for years.
2. Consumption would still continue to fuel growth in the country. Consumption-related stocks like RRHI, JFC, URC, PGOLD, CIC and DMPL would likely post solid earnings while construction and Infrastructure-related stocks will also take its place as the government still is pumping money to finish all its projects by 2016.
3. Looking at our price-earnings or P/E ratio, we are at 18.85 (via Bloomberg). This makes us a bit more expensive compared to other markets. But I have seen several global reports that more foreign funds are favoring the Philippines and Indonesia given the unrest in Thailand.
4. In spite of the market moving up, there are still a lot of stocks that are still undervalued. You may look at quality stocks that have not moved as much. You may want to check out the likes of SMPH if you are an investor and would want to buy stocks that have relatively not moved much.
We have more than nine months to go till the end of the year.
My desire is that you use the stock market to your advantage and that you learn how to earn consistently and the right way, that the stock market be your tool toward your dream of financial freedom. I hope these bits and pieces of information help you create your own conviction on what stocks you would want to buy or sell. As I always say, the best place for you to be in as an investor is that place where you have studied and researched well, that you are fully convinced that the stock that you are buying or selling is worth the time and money that you have expended.
Have a great week a head and may this week be your best trading week yet.
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Marvin Germo is a Registered Financial Planner of RFP Philippines. He is a Stock market trader and investor and a columnist of Business Mirror. He is the best selling book author of Stock Smarts.
Source: http://www.businessmirror.com.ph/index.php/en/business/banking-finance/28730-where-is-the-stock-market-heading
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