2015 corporate earnings seen growing by 19%

THE PHILIPPINE stock market is poised for another bull run this year as corporate earnings are seen growing at a much faster pace and finally catching up with lofty stock valuations, the chief strategist of stock brokerage Deutsche Regis Partners said.
“The Philippines is in all fronts looking like a rock star again,” company managing director Rafael Garchitorena said during an economic forum organized by Security Bank on Friday.
After three to four years of anemic earnings growth—single-digit rate from 2011 to 2014—Deutsche Regis sees local corporate earnings rising by more than 19 percent this year, supporting valuations that were skewed higher than historical levels.
While the local stock market was no longer cheap, Garchitorena said earnings were finally coming through.
The Philippine Stock Exchange index is seen trading at a price to earnings (P/E) ratio of 18 times, according to  Deutsche Regis. Historically, index stocks traded at a P/E ratio of only 14 to 15 times.

Amid a dearth of alternatives among emerging markets, Garchitorena said the Philippines had been a “winner by default” for several years and would remain so this 2015.
The upbeat forecasts on corporate earnings are supported by expectations that the Philippine  economy could grow by more than 6.5 percent this year.
Garchitorena said there was even a good chance that growth would be faster because the current forecast had yet to factor in the slump in global oil prices.
Being a net oil importer, the Philippines is widely expected to benefit from falling oil prices.  Garchitorena said apart from boosting gross domestic product, the decline in oil prices could temper inflation rates and jack up the country’s external surplus.
At the same time, he said that while government spending was a drag in 2014, a rebound in fiscal disbursements this year would add to the bullish prospects for the market.
With falling oil prices boding well for inflation, Deutsche Regis also sees the Bangko Sentral ng Pilipinas keeping interest rates steady until May or even later this year.
Among the risks to Deutsche Regis’ rosy forecast, Garchitorena said, would be if government spending would falter anew.
Power outages and the spillover effects of the port congestion were also considered risks, as these could drive away manufacturing investments.
Uncertainties heading into the Presidential elections in May 2016 could also be a risk factor.
On Friday, the PSEi closed at a new high of 7,689.91, up by 72.61 points or 1 percent.
Since the start of the year, the PSEi has gained by 6.4 percent and marked seven record closing levels.