PSEi seen rising to 4,700 in ’12 on earnings growth

Global investment group UBS sees the main-share Philippine Stock Exchange index climbing to a new high of 4,700 next year in line with its outlook of a 10-percent local corporate earnings growth and healthy economic fundamentals.

In a briefing Wednesday, UBS Investment Research head of Philippine equity research Jody Santiago said the market environment could still be very challenging in 2012 at least in the early part of the year given volatile external conditions.

As of Wednesday, the PSEi closed at 4,285.93, only slightly higher than the end-2010 level of 4,200.

In such a likely volatile environment for 2012, Santiago said UBS would prefer companies with some growth and defensive qualities and with valuations that were not stretched. “They must have dependable growth, earnings and cash flow that are more predictable and not subject to global volatility,” Santiago said, adding it was preferable for a company to have a strong leadership position and have products that were more of a necessity than a luxury.

Based on these criteria, UBS’ top stock picks for 2012 are Banco de Oro Unibank, Semirara Mining Corp., Metro Pacific Investments and Puregold Price Club.

In UBS’ view, telecom firms with high dividend yields, particularly Philippine Long Distance Telephone Co., could also become more attractive.

Among the key catalysts seen by UBS next year are potential central bank rate cuts, progress on the government’s infrastructure program and signs of a resolution of the crisis in Europe. UBS sees the Bangko Sentral ng Pilipinas slashing its key interest rate by 50 basis points next year to help counter a global economic slowdown.—Doris C. Dumlao