Nowhere to go but up: BDO sees benchmark PSEi seen breaching 8,500 at end-2017

The local stock barometer is seen to breach a new high past the 8,500 mark by the end of 2017, supported by a double-digit growth in corporate earnings against a backdrop of strong macroeconomic fundamentals.

BDO Securities senior vice president and research head Dante Tinga Jr. said the country’s fundamentals were strong. “There’s very little reason not to be bullish,” he said in a press briefing that announced the launch of the the online trading platform of BDO Nomura.

BDO Nomura, which will operate as a purely online stocks trading firm, is a joint venture between BDO Unibank (with a 51 percent stake) and regional investment powerhouse Nomura Holdings Inc. (with a 49 percent stake). The plan is to merge the research capabilities of BDO Securities with Nomura to enable the dissemination of the latter’s global research to local clients.

This year alone, the benchmark index is seen reaching 7,800, Tinga said.

“For next year, we’re assuming around 10 to 11 percent year-on-year appreciation (from current level of 7,600) on average share prices because we think earnings growth next year will be around 11-12 percent,” he said.

The analyst expects the local market multiple, currently at around 18 times price-to-earnings (P/E), to be maintained at roughly the same levels by next year. A P/E ratio of 18x means investors pay 18 times the kind of money they expect to make next year.

On sectoral picks, the group is upbeat on conglomerates, property and industrial counters but it is neutral on consumer, utilities, power and telecommunications.

Top stock picks in the conglomerate sector are Ayala Corp. and SM Investments Corp., while for property, the top bets are Ayala Land Inc. and Robinsons Land Corp. Within the industrial counter, the group is most upbeat on International Container Terminal Services Inc., Petron Corp. and Cebu Air.

“Nomura is excited to work with BDO, the leading commercial bank in the Philippines, to create a strong platform to serve a fast-growing market and bring new investment opportunities to domestic retail investors,” said Koichi Katakawa, president of BDO Nomura. He noted around 86 percent of new investors who opened trading accounts in 2015 preferred to trade through an online brokerage.

Asked why the BDO group needed to keep multiple stock brokerage houses under one house, BDO Capital & Investment Corp. president Eduardo Francisco said BDO Securities has people that investors could talk to, while BDO Nomura is a purely online trading firm. While the group was not intending to divide the market, he said BDO Nomura would cater to the younger, tech-savvy investors.

Katakawa said BDO Nomura sought to differentiate itself from other existing online stock trading firms by offering “smooth and simple” services.