PSEi still headed for 7,200 by year-end — First Metro Investment

The investment vehicle of the Metrobank group on Thursday maintained that Philippine Stock Exchange index will hit the 7,200 mark by year-end despite the current sell-off in markets overseas after the US Federal Reserve announced scaling back its massive bond buying program later this year. 

 

“Investors will continue to seek better yields, and the country has really strong fundamentals,” Reynaldo B. Montalbo Jr., First Metro Investment Corporation (FMIC) senior vice president and Treasury Group head told a briefing Thursday. 

 

The recent drop in equities market amid fears of the US easing its $85-billion bond buying stimulus is only a “correction,” Montalbo said. 

 

On Wednesday (Thursday in Manila), Federal Reserve chairman Ben Bernanke said the US central bank may ease stimulus later this year if the world's largest economy improves. 

 

This prompted sell-offs in markets the world over, including in the Philippines. 

 

Roberto Juanchito Dispo, FMIC president, said that the main PSEi will hit the 7,200 level at the end of the year with earnings per share of 20 percent and price earnings ratio of 18.7 times. 

 

At the end of the day investors will look for “sound fundamentals,” which “the PSEi can offer,” Dispo noted. 

 

At the same briefing, vice president and Investment Advisory Group head Bede Lovell Gomez said Philippine listed companies are the “only ones in the ASEAN economies to have 18 percent earnings growth” on average. 

 

The rosy outlook was underpinned by FMIC's 2013 gross domestic product (GDP) growth forecast of 7 to 7.5 percent, faster than last year's revised 6.5 percent and above government's 6 to 7 percent goal. 

 

“The Philippine economy's stellar performance of 7.8 percent in GDP in the first quarter is a sign that we are on the right track,” Dispo said. 

 

The economy will be supported by strengthening manufacturing and still robust consumer sectors, Dispo noted, saying the downside risks are coming from the slow roll-out of public-private partnership projects and a weak global backdrop. 

 

A stronger dollar sentiment due to improving prospects in the US prompted FMIC to see a weaker exchange rate of P41.43:$1 by year-end from an earlier P39.5:$1 forecast.

 

“The peso is seen to remain in depreciation trend,” said Dispo. 

 

The Philippine peso is currently trading at the 43 per dollar level, but University of Asia and the Pacific economist and FMIC adviser Victor Abola said increased dollar flows on the back of seasonal remittances from overseas Filipinos will strengthen the peso later in the year. 

 

Despite a robust growth and a stronger peso, FMIC still sees inflation settling at a benign 2.8 percent—below the central bank's 3 to 5 percent target and 3.1 percent forecast this year. — VS, GMA News