FMIC forecasts higher GDP, PSEi in 2012

MANILA, Philippines - The First Metro Investment Corp. (FMIC) is forecasting that the country’s economy will expand between six and seven percent this year, while the Philippine Stock Exchange Index (PSEi) will break the 5,500-level before the end of 2012.

In a briefing yesterday, FMIC president Roberto Juanchito T. Dispo said that the bullish outlook was buoyed by stronger public spending, especially in the infrastructure sector, in the second semester.

“We also anticipate an upgrade to investment grade for the Philippines before the end of 2012,” Dispo added.

Other areas of strong growth will be tourism, mining, gaming, and strong business process outsourcing (BPO) sector. There will likewise be a recovery in exports, lower world oil prices, and strong financial market.

Aside from stronger public spending, projects under the public-private partnership (PPP) projects as well as non-PPP projects is expected to get underway in the second semester.

“Banks will be releasing billions of pesos once the projects will pass the bidding stages, and the proponents will need huge amounts of money to fund the projects,” he added.

For example, the special deposit accounts (SDA) have already reached P1.6 trillion and it is estimated to hit the P1.8 trillion-level by end 2012.

The FMIC likewise said that there are several non-PPP projects especially in the energy sector, that private bank and non-bank financial institutions are prepared to fund.

The equities market, which was forecast to return to the 5,000-level in the first semester, is expected to break the 5,500-level in the second semester, with a price earnings ratio (P/E) of 13x, and assuming corporate earnings grew 12-14 percent.

The investment arm of the Metrobank Group is forecasting that inflation will slip further in the 3.2-3.4 percent area from the earlier forecast of 3.5 – 3.7 percent.

Remittances from overseas Filipinos will continue to grow at the five to seven percent rate.

Also a positive situation at the equities market is that over 60 percent of investments made emanate from domestic investors with slightly below 40 percent coming from foreign sources.

The secondary market likewise has been robust complimenting both the equities and fixed income markets.

In the fixed income market, meanwhile, corporate issuances are expected to bulge in the second semester, particularly in the consumer or retail sectors, as well as refinancing of existing or maturing debts.

FMIC senior vice president Justino Juan R. Ocampo said that mergers and acquisition (M&A) transactions will also assist the positive growth forecast.

“M&As are forthcoming, mostly in the middle-tier groups, and not just from the usual suspects (major corporates like the Ayala Group). We have been working on several M&A activities in Cebu and Davao in the past months,” Ocampo said, adding that majority of the transactions was from the food sector.