First Metro Investment Corp. (FMIC) is forecasting the Philippine Stock Exchange index to reach a high of 8,500 points this year , more bullish than a consensus estimate of 8,000 points.
Not only is FMIC bullish on stocks but also on bonds.
In a press briefing on Wednesday, FMIC said the equities market rally in 2015 will be driven by favorable macroecomic figures, increased spending ahead of 2016 national elections, more regional mergers and acquisitions, Asean integration take-off, lower oil prices, and strong demand for electricity.
The company forecasts the price to earnings (PE) ratio at 19x, while corporate earnings is projected to advance 13 percent to 16 percent for the whole year of 2015.
In 2014, FMIC noted that the Philippine Stock Exchange is the third best performing index in Asia after Shanghai and India, growing 23 percent year on year.
Roberto Juanchito Dispo, FMIC president, said in the company’s annual economic briefing that the country’s economic growth and the capital markets are seen to benefit from the “intact economic fundamentals, increased government spending on the back of infrastructure projects especially the public-private partnership projects (PPP), as well as the pre-election spending.”
In the same briefing, University of Asia and the Pacific Economist Victor Abola said a total of P44.3 billion worth of PPP projects are expected to be finished in 2015 out of the P127.4-billion awarded and in-progress PPP projects to date.
Abola said the P44.3 billion worth of PPP projects will be “another 4 percent addition to the gross domestic product” of the country.”
“We are optimistic in consumer, exports, manufacturing, and the resurgence in mining and tourism sectors,” Dispo said.
However, Dispo noted the risk factors that can shake the stock market rally, which includes the “looming power crisis; anticipated US interest rates hike; excessive decline in oil prices that can cause economic imbalances and decline of oil-dependent countries; and natural disasters.”
Bede Lovell Gomez, FMIC vice president, said that for the Philippine equities, the following sectors will drive gains in 2015: power, infrastructure, consumer, gaming, manufacturing, and the greenhorn technology segment on the boom of newly-listed mobile content provider Xurpas Inc.
“We still see volatility for the equities market but might be a little subtle, and we see a good uptrend for the rest of the year,” Gomez said.
Justino Juan Ocampo, FMIC executive vice president, said in the same briefing that more small caps or bite-sized initial public offerings (IPO) are anticipated within the year, given the success of small-time IPOs of DoubleDragon Properties Corp. and Xurpas Inc. in 2014.
Last year, stock rights offering of banks still account mostly from PSE issuances at 26 percent share, while there is a surge in preferred share offerings (22 percent share or P37 billion of the total issuances), and a decline in IPOs (7 percent share or P12 billion of the total from the 34 percent share in 2013).
For the fixed income markets, Ocampo said the Philippines is one of the “most active bond market” in the region, raising a total P166.5 billion in 2014 consisted mostly of debt fundraising of property firms.
“For the bond market, we’re seeing sustained momentum in 2015. 2015 will eclipse the funds raised in 2014. Banks, small cap firms are growth sectors, as well as financial, services, consumer segments,” Ocampo said.