Local stocks are seen to gain ground for the rest of the year and hit a high of 8,800 on the back of double-digit growth in earnings and a much improved macroeconomic environment.
For the rest of the year, First Metro Investment Corp. expects the Philippine Stock Exchange index (PSEi) to rebound to at least 8,400 to as high as 8,800.
In a recent briefing, FMIC vice president Cristina Ulang said the PSEi continued to dominate other asset classes in terms of returns at 298 percent in the last 10 years.
Ulang said FMIC favored companies with good growth track record, have managed their cash and capital expenditure well, are cheaper than historical valuations and have good balance sheet and ability to pay debt.
Ulang said FMIC was bullish on the banking sector because intermediation cost was improving and treasury books might show better income as interest rates go lower. However, Ulang noted that lending activities were slowing down, adding that the Bangko Sentral ng Pilipinas’ interest rate cuts were thus badly needed. FMIC’s top banking picks are BDO Unibank and Metrobank.
Meanwhile, with the country back in a low inflation rate regime, consumers are seen to enjoy a stronger purchasing power while consumer companies with strong brands in the market are seen to enjoy bigger demand. Its top picks for this space are Universal Robina Corp., San Miguel Food and Beverage and Wilcon Depot.
The property sector is seen to benefit from the shopping mall boom and the recovery of the business process outsourcing industry. FMIC’s favored issuers are Ayala Land, Megaworld and Robinsons Land.
Infrastructure firms are seen to benefit from the government’s catch-up spending program while the cement sector is seen to ride on this infrastructure build-up. FMIC’s top picks are Megawide Construction and Eagle Cement.
Meanwhile, Ulang said conglomerates may stage a recovery from dismal earnings in the first quarter. It top picks are Ayala Corp., JG Summit, Metro Pacific and GT Capital.
For the power and oil sector, FMIC’s top picks are Aboitiz Power and Meralco, while Cebu Air is its top pick for aviation.