Strong economic fundamentals will help publicly listed firms post higher earnings in the coming years, making them all the more attractive to investors even amid lofty valuations, Philippine American Life and General Insurance Co. (Philam Life) said this week.
“While growth elsewhere is just accelerating or below par, here it’s been strong and accelerating,” Philam Life equity fund management chief Eduardo Banaag said at a press conference Wednesday. “It’s good enough for listed companies to make money,” he said.
By the end of this year, the benchmark Philippine Stock Exchange Index (PSEI) is expected to reach 7,900 points, assuming a price-to-earnings (p/e) ratio of 17.5 times. By 2016, the index may reach 8,870 points, with an expected p/e ratio of 17.3 times said Philam Life, which manages about P200 billion in assets.
In 2014, the PSEI rose 23 percent to 7,230.57 points, marking the sixth consecutive year in the row that the index closed higher than the previous year.
Banaag said the index’s surge last year came despite relatively modest average earnings growth for firms of about 4 percent. The rally, he said, was a result of rising corporate and household savings that led to higher participation in the local market.
He said local savings should rise further in 2015 as economic growth translates into higher incomes both for companies and consumers. Last year, the economy grew by 6.1 percent, slowing from 2013’s 7.2 percent and 2012’s 6.8 percent.
This year, the government is aiming at a 7-percent growth.
Banaag was speaking at the sidelines of the launch of Philam Life’s new investment linked insurance product, Money Tree Elite.
An enhanced version of Money Tree launched many years back, Money Tree Elite is a one-pay investment and life insurance plan that gives investors the opportunity to invest in expertly managed funds with zero upfront or entry charges, while providing them with guaranteed life insurance protection of at least 125 percent of their investment.–Paolo G. Montecillo