PSEi seen setting new record in 2014

The Philippine Stock Exchange index may climb to new record highs next year even if local interest rates would bottom out from record-low levels, investment experts said Thursday.

Ahead of the Asia Pacific Association for Fiduciary Studies’ Annual Pacific Region Investment Conference to be held in the country on Nov. 7 and 8, top officials of co-host organizations CFA Society of the Philippines and Trust Officers Association of the Philippines (TOAP) on Thursday painted rosy prospects for Philippine assets.

Raffy Ayuste, president of TOAP and head of wealth advisory and trust group at BDO Private Bank, said the market remained “very optimistic” especially as economic growth was proving to be “resilient” despite delays in much-awaited infrastructure spending under the government’s public-private partnership framework.

“Hitting close to 8,000 (for the PSEi) next year is not an impossibility,” he said.

April Lee-Tan, head of research at COL Financial, said the last-minute deal to raise the United States’ debt ceiling averted a situation that could lead to a liquidity crunch similar to the Lehman crisis and potential recession in the US. For 2014, she said the PSEi could retest recent highs (around 7,400) and close next year at high 7,000 levels.

Tan said COL’s forecast of over 7,000 was premised on the assumption that 10-year local treasury bond yields would be maintained at 4 percent—which was put at risk with all the talks about the US Federal Reserve’s tapering of easy money. If the 10-year US treasury bond yield would hit 3.5 percent, the comparative local bond yield would likely reach 5.5 percent, she said.

At present, Tan said 10-year local bond yields were still at 3.6 percent.

Over a one-year period, Ayuste said local 10-year bond yields would rise but likely not beyond 4 to 4.5 percent. This, he said, should still be favorable for the equities market.

Tan said the US tapering would happen but would not be too substantial to disrupt global markets.

“A major concern next year for us is the unevenness of earnings,” she said, noting that banks would likely be flat compared to this year’s earnings, which were buoyed by extraordinary trading gains. Overall, she said average earnings per share in 2014 for corporate Philippines would be about 6 percent.

Tan said the risk on interest rates would be on the upside but noted that only a slight tightening may be expected.

“We agree with the view we’re not seeing any (asset market) bubble, so with the central bank still keen on boosting investments and economic growth, it’s difficult to expect (significant tightening),” she said.

APAFS has teamed up with CFA Society, TOAP, the Association of Development Financing Institution in Asia and the Pacific (ADFIAP) and Fund Managers Association of the Philippines (FMAP) to host the regional conference, which is expected to attract about 250 participants.