Santa Claus rally has started

Christmas appears to come early to stock traders as they project a surge in activity as the positive forecast keeps getting better.

There is what is termed as a Santa Claus rally in most stock markets which is the sustained increase in buying of shares that occurs around the Christmas holiday similar to what is driving the Philippine Stock Exchange index (PSEi).

The consensus now is a figure close to the 8,500 mark, inching closer to the record 9,078.37 achieved in January 2018.

At 7,500, the Philippine Stock Exchange index (PSEi) is now up over 17 percent for this year to date and is currently the top performer across the Association of Southeast Asian Nations.

Recently, the key resistance level of 7,500 which was the previous year-end target, was achieved prompting pundits to upscale to an 8,500 goal.

The 12-month index target now stands at 8,354 based on Bloomberg’s target price compilation.

Brokerage house AB Capital Securities counted the net foreign buying streak had extended to 27 straight sessions.

The record run matches that of last March 2024 and was the longest since May 2014.

A total of $411 million has flowed into the market during the period pushing the balance year-to-date to +$87 million vs. a negative $500 million in the 1st half.

Sensitivity to rates and favorable valuations are among the factors that triggered renewed foreign interest in the local stock market.

The Philippines is one of the markets with positive rate differentials vs. the US, but remains historically low.

According to AB Securities: “With the Fed expected to cut more and local inflation trending lower than expected, the BSP (Bangko Sentral ng Pilipinas) has a clearer and longer runway to cut its rates.”

It now forecasts a total of 75 basis points (bps) cut instead of an earlier 50 bps.

Leading issues

Banks and Conglomerates top the list of most net foreign-bought stocks.

And it’s only lately that we’ve started to see foreign interest in the Consumer sector. There seems to be limited interest in Property with only ALI seeing some net inflows.

We remain overweight on Banks and Conglomerates, and we expect the Consumer and Property sectors to play catch-up in terms of foreign flows.

AB Capital’s top stock picks including GT Capital, SM Prime Holdings Inc., Jollibee Food Corp., Converge, SM Supermalls and Banco de Oro continue to offer double-digit upside.

Monde Nissin and Metrobank also offer some more upside, albeit currently now more limited, it added.

Foreign ownership in the local bourse remains relatively low at 24 percent versus 27 percent pre-pandemic and a high of close to 30 percent back in 2014.