THE benchmark Philippine Stock Exchange (PSE) index may return to the 7,800-point level by the end of the year, as corporate profit is seen growing between 10 percent and 11 percent.
BDO Securities Corp. head of research Dante Tinga Jr. said the growth could translate to about a 12-percent share appreciation.
“Because we think earnings growth next year will be around 10 percent to 11 percent, we believe the market multiple will hold at roughly the same level,” Tinga said.
Price-to-earnings ratio is seen to settle to about 18.5 times earnings.
The main index closed on Monday at 7,609.31 points, down by 40.91 from its previous close.
“We’re looking at around an 8-percent to 9-percent earnings growth this year. Last year growth averaged 5 percent, so there is an uptrend in terms of earnings. That’s one of the reasons we’re positive on equities,” Tinga said.
The 2017 earnings forecast is achievable, amid the current environment of low interest rates, he said.
Tinga added that fundamentals of the local-equities market remain fixed for the long term, though there is “some concern on investor sentiments, particularly on the political noise.”
“But as the fundamentals are intact, there is really very little reason not to be bullish,” he said.
“It all depends on the fundamentals. If you get investor sentiment, it swings constantly, but if you look at the market for a long-term basis, the valuation is always on the fundamental.”
He said the threat of a rate hike by the US Federal Reserve is a near-term risk, as well as other plans of central banks in the world to tighten their rates.
BDO Securities said it is optimistic on the prospects of stocks in the conglomerate, property and infrastructure sectors, while “very neutral” on consumer, utilities, power and telecom.
“Within the conglomerate, there are Ayala Corp. and SM Investments Corp. Why? The Philippine economy is evolving, getting broader. The best way to take advantage of that is to buy stocks with regional footprint asset capital, and core to invest in long-term perspective,” he said.
In the industrial sector, meanwhile, BDO Securities included in its stock picks port operator International Container Terminal Services Inc., Petron Corp. and Cebu Air Inc.