Philippine market posts new record high

MANILA, Philippines—Most local stocks rallied on Wednesday, lifting the main index to a new record high beyond 4,600, as investors snapped up shares of blue chips led by index heavyweight PLDT and large-cap property firms.

The main-share Philippine Stock Exchange index gained 84.78 points, or 1.86 percent, to finish at 4,645.86 as all counters gained ground. The local stock barometer has surged to a new all-time high for the second straight session.

“The Philippine market is being re-rated by investors. Foreign funds are buying all the large caps,” said fund manager Paul Joseph Garcia, senior vice president at Bank of the Philippine Islands.

Garcia said the main index might breach 5,000 or even hit 5,500 at the best-case scenario within 2012.

“The market is at an all-time high but a lot of large caps are still way below their all-time high levels. That’s why the market has way to go,” Garcia said.

The upswing was led by the property and services counters, which both jumped by over 3 percent, and benefited from prospects of a low interest-rate regime in the country this 2012.

The Philippine Long Distance Telephone Company (PLDT), in particular, is seen as an attractive play for yield-seeking investors based on an assumed dividend yield even if it were to test all-time highs. Shares of the telecom giant rose by 4.45 percent to finish at a 52-week high of P2,818 per share. PLDT has a 16.69 percent weight on the PSEi, the heaviest among blue chips.

Shares of PLDT hit an all-time high of over P3,000 in 2007 but adjusted for the dilution of the share-swap deal to take over Digitel. The telco’s peak price is estimated at P2,963 per share.

Meanwhile, Garcia said that despite concerns on oversupply in the residential property sector, the property counter has been perked up by prospects of low interest rates.

“The market is looking for laggards and buying cyclical stocks like banks and property,” he said.

Value turnover was heavy at P8.5 billion. The market was swamped with 127 gainers while 49 stocks declined and 37 were unchanged.

Gains by ALI, Metrobank, BDO, AGI, Megaworld, SM Investments, URC, BPI, Ayala Corp., Globe, SMC, Philex and MPI also contributed to the PSEi’s rise to new heights.  Other stocks that gained in heavy trade were Lepanto “A” (open only to local investors) and “B,” Vista Land and PNB.

On the other hand, EDC and Aboitiz Power bucked the day’s rise.

At current price levels, the market is trading at a forward-looking price-to-earnings ratio of 13.3x which is still cheap compared to the historical average PE ratio of 15x and the high of 17x during the last stock market bull run in 2007, according to Garcia.

A PE ratio of 13.3x means that investors are paying 13.3x the amount of money the companies are making in a given year.