Market seen in ‘golden era’
BUSUANGA—The local stock market is fairly valued at present but it has the potential to climb new heights once investors price in 2015 corporate earnings and buy into the Philippine “super-cycle” story, said the chief of BPI Securities.
Michaelangelo Oyson, managing director of BPI Securities, said in a presentation during the Fund Managers Association of the Philippines’ (FMAP) annual convention here that the market was likely mimicking the run-up in 1996 but without the nightmares of the 1997 Asian financial crisis in sight.
He said the Philippines was in the middle of an economic super-cycle and the local stock market was, consequently, in a “golden era.”
Tracking the economic super-cycle, Oyson said that “if one were to compare the market to a clock, it was at around 10:30 p.m. or in the mid-cycle, or the second wind of growth stage.”
This stage is characterized by the following: Strong gross domestic product (GDP) growth, strong earnings per share (EPS) growth, credit growth is still accommodating but policymakers are watchful of inflation threats.
Among the manifestations of a late cycle market, on the other hand, are as follow: When GDP growth is declining, the EPS growth is declining, credit growth is decelerating and monetary policy is tightening.
For the next few months, Oyson is looking at market volatility as the market hovers between the middle to the late cycle.
After the late cycle comes the recession or deflationary stage, during which GDP and EPS contract, credit growth stalls and monetary policy turns dovish to address deflationary concerns and economic contraction.
Based on current indicators, he said the Philippine Stock Exchange index was fairly valued at 6,200. Once markets factor in 2015 earnings, he said the local stock barometer could easily breach 6,700.
If investors will more aggressively price in the strong potential of local equities, he said the PSEi could revisit 7,000. Finally, if the investors buy into the super-cycle, then the PSEi could breach 8,000, Oyson said.
