Stock index seen hitting record 8,500 by yearend

MANILA, Philippines - While some analysts have been quite conservative in their outlook for the equities market this year, the investment banking arm of the Metrobank Group on the contrary provided yesterday the most optimistic forecast for the local benchmark index in 2015.

First Metro Investment Corp. (FMIC) is expecting the Philippine Stock Exchange index (PSEi) to surge to as high as 8,500 by yearend, backed by the country’s favorable macroeconomic backdrop.

 “The equities market is seen to breach the 8,000 level and hit 8,300 to 8,500 with price earnings (PE) ratio of 19x and corporate earnings growth of 13 percent to 16 percent,” it said.

Most analysts and stock experts have earlier placed their target PSEi growth at a range of 7,500 to 8,000 for this year.

FMIC vice president Bede Lovell S. Gomez said the group’s forecast is backed by an expected increased spending ahead of the 2016 national elections, more regional mergers and acquisitions, Asean integration take-off, lower oil prices, and strong demand for electricity.

FMIC’s 2014 prediction for the PSEi was to end between 7,000 to 7,200 level. The benchmark index ended the year at 7,231 to finish as the world’s third best performing stock market.

Gomez said among the sectors seen to lead the benchmark index this year are holding firms, industrial, property, services, and financials.

Industrial firms are seen to have a 33.2 percent earnings per share (EPS) growth, followed by property companies and holding firms with 15.34 percent and 14.98 percent, respectively.

 “We might see a similar volatility in the stock market this year but more tame,” Gomez said.

For capital raising, FMIC said corporate bond issuers, particularly property companies, will take advantage of the lower inflation and lower interest rates environment through more innovative fund raising structures such as securitization and direct retail issuances in addition to conventional bank financing.

Infrastructure financing, primarily in power and water, will be in demand this 2015 while a number of acquisition financing and mergers and acquisitions, both onshore and offshore, are also expected, FMIC added.

FMIC, however, did not disregard various internal and external factors that may hamper the expected robustness in local stocks.

Among such factors include the looming power crisis, policy rate changes of major economies, sluggish PPP projects, global economic slowdown, natural disasters, and low oil prices for commodity exporters.