‘Headwinds’ seen in banking, telco, property
Ayala unit Bank of the Philippine Islands (BPI) has revised downward its 2015 forecast for the stock market given the ‘headwinds’ expected in the banking, telecommunications and property-related sectors.
The bank cut its projection for the benchmark Philippine Stock Exchange index (PSEi) to 7,886 points from its previous 8,000-point forecast.
“A more reasonable target is 7,886 as the 8,000 [points]projection now is a bit of a challenge,” Michaelangelo Oyson, BPI Securities Corp. chief executive and managing director, told reporters in a press briefing on Friday.
“This is because of the headwinds on the banking sector, which accounts for the large part of the index, headwinds on the telco sector on the ceiling price cap as of the moment, and the property segment where we can see tailwinds, but ahead of rising interest rates and the tightening of regulatory rules from the central bank [Bangko Sentral ng Pilipinas],” he explained.
Besides these three local “pull factors”—banking, telecommunications and property—Oyson said that the market is also mindful of the power sector, as investors’ sentiments from the looming power crisis in the summer months next year will depend on how the country will fare in coping with anticipated problems in the energy sector next year.
To retest record by year-end
At present, the benchmark stock index is seen benefiting from “push factors” from global leads, mainly the improvements in the US economy and the newly launched multi-trillion yen asset buying program of Japan.
With these factors, Oyson said that the market should retest its all-time high level of 7,392.20 set in May 2013 by the end of this year. BPI is currently forecasting the PSEi to reach 7,400 points before the end of 2014.
In terms of the outlook for individual sectors, Oyson said the consumer, power, gaming and automotive sectors are seen as positive over the next 12 months, while the banking, commodities, telecommunications, property, financials and infrastructure segments are projected to follow a negative trajectory.
Stocks to watch
For the next 12 months, the BPI chief recommended investors buy the stocks of JG Summit Holdings Inc. (JGS), Universal Robina Corp. (URC), D&L Industries Inc. (DNL), and Vista Land and Lifescapes Inc. (VLL).
Oyson said JG Summit is the best performing conglomerate in the country in the last five years, with steady growth across all its business segments.
Underappreciated stocks, he said, are URC and DNL, because they are the best-positioned consumer-related stocks with respect to the Asean Economic Community integration next year. Vista Land, in contrast to much of the rest of the property sector, should reap gains from its massive land bank in building more developments, Oyson added.
“Emerging stars,” or stocks that have posted record advances in the past few weeks are Bloomberry Resorts Corp. (BLOOM) and Melco Crown (Philippines) Resorts Corp. (MPC), who are leading the booming casino and gaming sector.
Economic ‘supercycle’ not so ‘super’
Last year, BPI said that the PSEi was “in the middle of an economic supercycle” and was poised to go as high as 8,000 to 9,000 points in 2014-2015. But due to local pull factors, the bank said that the overall market appears to have turned in the direction of consolidation with the end of the supercycle drawing near.
“Some 18 months from now, we are seeing that the market will enter a consolidation period. After that consolidation, we will see whether the market can go up or tumble. The [economic]supercycles do not last forever,” Oyson said.
“Where would we go from here? It depends on the next president. In this administration, the market was re-rated and premiums were up.
But if we have an incompetent president after that, then we can go back to 6,200 points and lower,” he added.
BPI’s forecast for the rest of the year is towards the lower end of the broad range of estimates among equity analysts, who see the market finishing 2014 between 7,400 and 8,000 points.
On Friday, the PSEi closed up 0.26 percent or 18.71 points at 7,217.34, while the broader All Shares index added 8.90 points or 0.21 percent to close at 4,245.96.