Analysts bullish on 2015 stock market growth but… Government underspending threatens bourse momentum

CEBU, Philippines - The local bourse is seen to outperform in the ASEAN region through next year while investors are likely to become more perceptive on the change of government as the 2016 national election nears.

But stock analysts warn government underspending can be a major drawback in the performance of the market. The Philippines’ gross domestic product slowed down to 5.3 percent in the third quarter this year, its slowest pace since 2012.

“The Philippine economy continues to grow at a stellar pace, considered as one of the fastest growing economy in the region, despite the slowdown in the third quarter,” says Lexter Azurin, equity research head of brokerage firm UniCapital Securities Inc.

The analyst expects the bellwether Philippine Stock Exchange index to reach 8,500 next year with the recovery of corporate earnings, positive economic data and the coming election season.

“Economic fundamentals are sound and our market is worth trading at a premium, despite being arguably the most expensive market in the region,” Azurin says, adding investors generally view the Philippine market as a good investment destination.

Despite concerns on political noise and uncertainties, he asserts the market can still perform well if the government is consistent in continuing its projects.

BULLISH OUTLOOK

The recent credit rating upgrades from debt watchers affirm the status of the country as an investment place for both local and foreign investors. Debt rating is a key channel in pushing up share prices.

The analyst also notes the PSEi, which reflects the country’s economy as a whole, is considered the third best performing market on year to date basis, only next to India and China.

Marco Nino Velasco, USI business development officer, expresses his bullish growth outlook driven by the continued growth of remittances from overseas Filipino workers, business process outsourcing and consumer sectors.

He, however, says spending public finances should increase to spur the country’s economic output which has tracked a slower pace this year compared to last year’s unprecedented 7.2 percent GDP growth.

The same sectors will drive the country’s economy next year. But he says natural calamities continue to be a big threat to the growth of the country which is vulnerable to an average of 20 typhoons a year.

“The only downside we have is if the government will not spend more, mao nay mobira paubos sa market. But looking at it as a whole, the chances of the market going up mas is bigger than dropping.

“We are expecting a strong market next year. The same growth drivers will buoy it,” he said.

STOCK PICKS

Azurin also shares his 2015 top stock picks which include Bloomberry Resorts Corp. for gaming, Jollibee Foods Corp. for consumer, SM Prime Holdings Inc. for property and First Gen Corp. and Energy Development Corp. for power sector.

“There are several industries that may outperform in 2015 such as the gaming industry as well as the consumer industry. And as the election season approaches, we expect some industries may benefit from this such as the consumer, media, etc.,” he says.

The nation’s economy is mainly driven by private consumption which account for 70 percent. The fledgling casino industry is expected to top the market following the opening of the City of Dreams Manila of Melco Crown Resorts Corp.

In a previous interview, Norman Jay Go, Cebu equity sales head of BPI Securities Corp., said the industry would have tremendous growth due to the increasing gaming revenues. Pagcor, the country’s gaming regulator, said gaming in the Philippines has a long way to go in terms of revenue potential.

Velasco also cites the country's mining sector particularly nickel to be one of the top performers next year with Indonesia already banning raw metal shipments. Philippines has emerged as the top supplier of nickel to China.

Liquor firm Emperador is also among the top stocks for to buy because of its current low share price at P11, he said, adding “That’s an opportunity for investors as early as now.”

Stockbrokers also foresee more people will be putting their money into the equities market which, based on historical returns, has the highest return among investment instruments in the Philippines.

“Interest rates remain low, which is beneficial for the businesses, encouraging them to further expand their business,” Azurin says.

Velasco points out: “The thing is we can’t experience the growth of these industries -- the growth of our economy -- if we don’t invest in the stock market.” (FREEMAN)