Brokerage sees stocks at 5,000-mark by end-2008

A brokerage firm predicts that the stock market would easily hit a new all-time high this year, and expressed optimism the main index would reach an unprecedented 5,000 points by the end of 2008. Abacus Securities Corp., in its yearly market outlook report, said the Philippine Stock Exchange index (PSEi) would continue to rise owing to increased investment boosted by the government plans to hike spending for services and infrastructure. "Although admittedly on the high side, we believe that the composite index has a chance to climb to 5,000 by the end of 2008… We believe therefore, that any dip in the market would be a buying opportunity," Abacus said. On Thursday, the PSEi closed at 3,081.73, its highest level since Apr. 30, 1997 when it closed at 3,104.77. The composite index’s all-time high was set on Feb. 3, 1997 when it hit 3,447.60 points. The local bourse started to slide with the onset of the Asian financial crisis in July 1997. "The elements necessary to extend the current bull run a re now all present. The combination of a much improved fiscal picture, prospects of improved ratings, falling risk premiums, declining inflation…will attract even heavier flows of portfolio investments over the next two years," Abacus said. Credit rating upgrade The brokerage firm said the ongoing fiscal consolidation by the Arroyo administration could lead to the country paying down its external debts by 2009. Steps towards balancing the budget and trimming the country's debt stock have also improved the country's standing with credit ratings agencies, Abacus said. "By the end of the year (2007), we expect ratings to have improved by as much as two notches to just under investment grade," Abacus said. The firm also said that the Philippines has a very big chance of reaching investment grade by 2010. "This means risk premiums will continue to contract which, in turn, will lead to lower interest rates on the Philippines' sovereign debt and also result in higher valuations for equities," Abacus added. Passing the budget, achieving targets The trading firm said passing the 2007 budget by February also bodes positively for the economy, and in turn, for the equities market. "Compared to the reenacted budget used last year, we expect a big jump in infrastructure spending. The government is aiming to boost growth, especially in the provinces, by building new roads, bridges and other infrastructure," Abacus said. Substantial spending on infrastructure and services is what foreign investors have all along said is lacking from the country's current economic set-up. Despite its overall optimism, Abacus cautioned that its forecasts are hinged on the timely achievement of the government's fiscal goals, and the credible conduct of the May elections. "Our targets would be in jeopardy if the government fails to meet its fiscal targets going forward. The conduct and results of the upcoming May electiosn could also affect investor sentiment going down the road," Abacus said. The Arroyo administration earlier targeted a budget deficit of P125 billion for 2006, but this is expected to be undershot by as much as half as government spending was cramped by the reenacted budget. The budget deficit for the year has been recorded at P58.3 billion as of November. -GMANews.TV