Bullish outlook for stocks
After hitting multiple record peaks this year, the stock market may have room to scale new heights at least for the next six months, according to stockbrokerage Campos Lanuza & Co.
The local stock market will reopen Tuesday after a longer weekend break due to Monday’s mid-term elections. Last week, the main index gained by 0.65 percent to close at another all-time high of 7,262.38 on Friday.
Campos Lanuza head of research Jose Mari Lacson said the stock market outlook for the next six months remained positive.
“Excess liquidity driven by historically low interest rates will continue to drive stock prices. While the market’s valuations are already high relative to comparable bull market years, we believe there is still room for these stock valuations to move higher,” Lacson said.
“We believe that the extremely low-interest rate environment is temporarily driving the equity risk premium to lows that can justify market P/Es (price to equity ratios) of over 30x,” he said.
A P/E ratio of 30x means that investors are paying 30 times the amount of money that the company is earning per share in a given year.
“The key word though is temporary. Investors should be aware that the main risk factors are the continuing weakness in gold prices and rising equity returns in the United States, which may lead to a reversal of capital flows or a shift to a tighter monetary policy by the BSP (Bangko Sentral ng Pilipinas),” he said. Doris C. Dumlao
