JP Morgan, First Metro bullish on Phl economy

MANILA, Philippines - JP Morgan Chase & Co. and First Metro Investments Corp. (FMIC) of the Metrobank Group are bullish about the Philippine economy and see the local equities market breaching and hitting a new record level above 5,000 points this year.

JP Morgan head of research Gilbert Lopez said in a press conference that the Philippine Stock Exchange index (PSE) is likely to hit a new record level of 5,100 points or 5,150 points this year.

Lopez pointed out that the equities market is likely to perform better than the fixed income market this year on the back of the country’s improving economy and higher government spending.

“We are bullish in the market. For 2012, our main theme would be increased infrastructure spending by the government,” Lopez said.

He pointed out that investors could place their long term investments in conglomerates and banks that could benefit from the take off of the Aquino administration’s public private partnership (PPP) program this year.

According to him, JP Morgan is looking at an earnings growth of about 10 percent to 12 percent this year and a price-earnings (PE) ratio of about 17 times to 18 times.

He recommended Metro Pacific Investments Corp. (MPIC) and diversified conglomerate Ayala Corp. that have expressed interest in major infrastructure projects under the PPP.

Likewise, he said investors could invest in banks particularly the Ayala-controlled Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Co. (Metrobank), and Security Banking Corp.

Lopez said banks had a banner year in 2011 in terms of assets and loan expansion.

Adrian Mowat, JP Morgan’s chief emerging market and Asian equity strategist, told reporters that the country’s gross domestic product (GDP) would grow by about four percent this year.

The country’s GDP growth slackened to 3.7 percent last year from 7.6 percent in 2010 or lower than the government’s revised target of 4.5 percent to 5.5 percent due to weak global trade and underspending by the national government.

Mowat said investors are attracted to the Philippines on the back of its stable political environment, stable foreign exchange, manageable inflation, and record low interest rates.

He explained that emerging market economies including the Philippines would perform better this year amid lower inflation.

“We expect emerging markets including the Philippines to perform very well this year. It (inflation) is no longer the problem and central banks have reduced interest rates,” Mowat said.

JP Morgan said the country’s GDP would expand four percent this year and inflation four percent at the end of the year.

Inflation inched up to 4.4 percent last year from 3.8 percent in 2010 despite higher commodity and oil prices.

For his part, FMIC president Juanchito Dispo said the PSE index would breach the 5,000 point level this year.

“The Philippines will continue to attract higher investments,” Dispo added.

He explained that the Philippines is the best performing equities market in Asia last year and is the second best in the world next to Dow Jones.

The PSE index hit a new all-time high of 4,677.62 points last Thursday.