The Philippines, armed with stronger macroeconomic fundamentals and corporate earnings, is now being “differentiated” from other emerging markets and is likely to see its local stock barometer rise to new heights beyond 8,000 by 2016.
This was the view shared by stock experts from mutual fund management firm Philequity Management Inc. and stockbrokerage Wealth Securities during an investors briefing on Saturday. The experts believed that the market had already hit bottom last January and rallying again as investors were starting to appreciate the country’s better fundamentals.
“We have incipient signs that we are being differentiated,” said Wilson Sy, fund manager and director at Philequity. “The market is now showing signs of resilience.”
Miguel Aragao of Wealth Securities said the main-share Philippine Stock Exchange index (PSEi) would likely return to the 7,000 level and further rise to 8,000 by 2016, backed by a growth in earnings per share (EPS) of 11 percent this year and 15 percent in 2015.
Jerome Gonzales, head of research at Philequity, said the market would be officially deemed back to the bull market once the 6,800 level is broken. In two years, he said the next target would be 8,100.
Aragao said the PSEi had underperformed in previous months despite being “the best house in a bad neighborhood.” Concerns on government spending arising from the pork barrel scandal, regulatory risk jitters on mining and power rates, rising global interest rates and depreciating peso also contributed to this lackluster performance.
For consumer stocks, Wealth Securities’ top picks are Universal Robina Corp., D&L Industries, Puregold Price Club and Robinsons Retail Holdings. For conglomerates, it favors Ayala Corp., DMCI Holdings and Alliance Global Group Inc.
Favored stocks among utilities are Manila Electric Co., First Gen and Aboitiz Power Corp. For gaming, Wealth Securities’ top picks are Melco Crown Philippines, Bloomberry Resorts Corp. For telecom, it is Philippine Long Distance Telephone Co. and for mining, Nickel Asia.
Meanwhile, Wealth’s top banking picks are Metropolitan Bank and Trust Co. and Banco de Oro Unibank while for property, the local stockbrokerage prefers Ayala Land and Megaworld Corp.
Moving forward, Aragao said one wild card would be China, given concerns on hard landing, shadow banking, credit crunch, possible property bubble and a war-like stance which nobody wants to see escalating.