The local stocks index has enough steam to hit as high as 6,200 in 2013, according to stock market veteran Wilson Sy.
MANILA, Philippines—The local stocks index, now trading at all-time highs, has enough steam to hit as high as 6,200 next year, said stock market veteran Wilson Sy.
Sy, a director at mutual fund management firm Philequity Management and former chairman of the Philippine Stock Exchange, said the country’s rosy economic fundamentals were conductive to corporate earnings growth.
He said the Philippines was among the few countries whose growth trajectory remained certain despite the global economic downturn.
As such, he said the PSE index might end the year at 5,600 and test 6,000 to 6,200 by next year.
Based on Philequity’s individual price targets for index stocks, the index is seen rising by 15 percent through next year from current levels.
A key assumption is that the domestic economy would sustain a growth rate of more than 5 percent, which will support corporate earnings.
According to Philequity’s estimates, the local stock market is now trading at 18.7 times the prospective earnings for 2012 and at 16.1 times the likely earnings for 2013.
But based on the price/earnings-to-growth (PEG) ratio, Sy said the market was still growing by 15-16 percent.
“There’s more certainty in the growth of Philippine stocks that are listed compared to other countries like Korea and Thailand that are reliant on exports,” Sy said, adding that domestic consumption was a long-term theme for the Philippines.
PEG, a widely used indicator of a stock’s potential value, takes into account not only the price-to-earnings multiple but also the growth in earnings per share.—Doris C. Dumlao