6th year of bull run seen

MANILA, Philippines–The local stock barometer is likely to reach 8,200 by early 2016 as the bull market continues to ride on the Philippine structural reform and growth story, local stock brokerage DA Market Securities said.

In a research note, DA Market said the local bull market—an offshoot of reforms undertaken during several administrations after the 1986 Edsa Revolution—would enter its sixth year this 2015.

It said the more optimistic outlook on the Philippines was a product of structural reform and growth which began during the presidency of Corazon Aquino, marking the return of democracy after a 20-year dictatorship, followed by reforms during the Ramos and Macapagal-Arroyo administrations.

“Under the [President Benigno Aquino] administration, the transformation continues with a focus on good governance as well as infrastructure spending ($2.3 billion estimated until 2016), garnering the much-coveted investment-grade status for the country,” the brokerage said.

DA Market also cited the Philippines’ underlying demographic dividend story which suggested that of the country’s 100-million population—with a median age of 23.3—about 61.6 percent is of working age (25-64).

“Given the high productivity rate of 100 million population, the Philippines is seen to be at an important inflection point and is expected to reach a gross domestic product per capita at purchasing power parity of $5,000 in 2015, another key growth factor,” the brokerage said.

Citing technical readings, DA Market said the PSEi was now on the fifth wave of a larger third wave of its current cycle which began in 2003. The brokerage was referring to the five “Elliot Waves”—a tool used in tracking and forecasting financial market cycles.

“Based on this pattern, we project a [Philippine Stock Exchange index] target of 8,200 for the fifth wave. This target is also in line with analyst consensus. This target may coincide with sentiment cycle of uncertainty that comes with the changing of guard or the presidential elections in May 2016,” the brokerage said.

After this wave, DA Market said investors must be vigilant of the “fourth” wave. As a point of reference, the brokerage said the local market had experienced a smaller fourth wave of the larger third wave last year which ended with a triple bottom by December 2013.