PH stock index breaches 7,000

The local stock market raced to a new all-time high, breaching the 7,000 mark on Monday as the bulls were powered by an early stream of strong local first-quarter corporate earnings and expectations of another investment-grade rating and a further decline in interest rates.

The Philippine Stock Exchange index racked up 163.38 points, or 2.35 percent, to close at 7,120.48 as the start of the first-quarter earnings reporting season excited investors. Prospects of a rating upgrade from a second global credit watcher and further cuts in the Bangko Sentral ng Pilipinas’ rates on special deposit accounts (SDAs) also boosted risk-taking.

This marked the PSEi’s 27th breakout to all-time highs this year. The main index, which is in its fifth year of upswing, has gained a total of 1,307.75 points, or 22.5 percent, since the start of 2013.

Paul Joseph Garcia, senior vice president and head of Odyssey Funds at Bank of the Philippine Islands, said the market was factoring in a potential corporate earnings surprise, which could lead to a potential “re-rating,” or change in how valuations are viewed. At the current level, the PSEi is now trading at about 20 times prospective 2013 earnings or above the historical level of about 15x price-to-earnings ratio.

“Prices have gone up to the point where you have already anticipated earnings revision. Earnings need to catch up but at the rate we’re seeing, like in the case of Banco de Oro, that may happen,” Garcia said. “It’s hard to be a contrarian at this point.”