First Metro Investment Corp. (FMIC), the investment bank of the Metrobank Group, expects tempered growth for the Philippine Stock Exchange (PSE) in 2016 given a mix of risks and opportunities.
In a press briefing on Wednesday, FMIC said the PSE index (PSEi) would likely hit “a high of 7,500”, with earnings per share growth of 13.8 percent and the price to earnings ratio hitting 18x.
Bede Lovell S. Gomez, FMIC vice president, said the market was not expected to breach the record closing high of 8,127,48, hit on April 10 last year.
Likely to provide a boost are a projected 13.8-percent growth in corporate earnings, “stronger-than-expected” gross domestic product growth and the “post-election market returns” that will mostly benefit the consumer sector.
The Philippine economy, it said, could grow by 6 percent to 6.5 percent this year, below the official 7 percent to 8 percent target.
Posing risks, Gomez said, are El Niño-based inflation upticks, declining oil prices and uncertainties with regard to local politics and global financial markets.
In terms of fund raisings and issues, FMIC Executive Vice President Justino Juan Ocampo said companies would most likely tap credit lines in the first half and then issue shares or debt during the second semester.
The latter, he explained, would be due to uncertainties over the turnout of the May elections and rising concerns in the global market.
Ocampo also noted that most banks had recapitalized or raised enough funds last year, which will push them to mobilize their capital this year.
He said they remained hopeful that some companies would brave the market in the first half as doing “tends to do better” in terms of valuation and would also reduce the yearend rush of issuances.
This strategy would also increase the number of issuances and the aggregate amount to be raised, he said.
Ocampo was also hopeful that fund raising this year would equal or even surpass last year’s result.
Share sales conducted in 2015 amounted to P185 billion, higher than the P153 billion raised in 2014 despite fewer offerings.
FMIC, lastly, forecast five-year bond rates hitting 3.75 percent to 4.25 percent, 10-year bonds at 4.25 percent to 4.75 percent and 20-year bonds ranging from 5.25 percent to 5.75 percent.