The Philippine benchmark index (PSEi) rallied 2.27 percent to 7,417.25, closing at its strongest level in 31 months.
More importantly, it gained 20.44 percent from its recent low of 6,158.48 last June 21. Stocks are said to enter bull market territory when they rise by 20 percent from a recent low.
Beware of market corrections
Lower interest rate expectations encourage investors to move funds from low-yield savings into the stock market to achieve better returns.
While the market rally has a solid foundation, technical indicators are showing signs of overheating. In other words, some investors see this as a signal to take profits, potentially leading to short-term pullbacks.
“The benchmark index continued its very bullish momentum to close at its highest level since February 2022 on the back of the BSP’s significant reduction of the reserve requirement ratio and strong foreign fund flows,” Juan Paolo Colet, managing director at leading investment bank China Bank Capital Corp., said on Monday.
“The market is technically overbought and we expect a pullback very soon,” he added.
New bull season incoming?
Alfred Benjamin R. Garcia, AP Securities head of research, also expects investors to soon take profits off the table.
“Our next stop is the resistance at 7,500. We’ll most likely see a pullback soon, as we are trading at overbought levels. But medium to long-term, I believe that this is just the beginning of a new bull market,” he said.
Upgraded target
Garcia said stock prices are being supported by a mix of lower interest rates and an upcoming reserve requirement cut for banks, along with government spending programs aimed at boosting the economy.
“Macroeconomic forecasts also point to benign inflation and robust economic growth in the coming years, which should underpin corporate earnings,” he said.
AP Securities is raising its year-end PSEi forecast from 7,355 to 7,662 while the tentative 2025 target is over 8,900.
Banks leading the charge
Monday’s rally was led by the Ty family’s Metropolitan Bank & Trust Co. (+2.38 percent). It was followed by International Container Terminal Services (+2.63 percent), BDO Unibank Inc. (+1.88 percent), Security Bank Corp. (+7.82 percent) and Ayala Land Inc. (+2.48 percent).
Total value turnover reached P8.68 billion while foreigners were net buyers to the tune of P1.74 billion, data from the stock exchange showed.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
