IT’s July. The summer is over and soon we will start hearing Christmas carols. How time flies.  Six months have passed since the start of the year and the Philippine Stock Exchange Index (PSEI) has moved up 0.008 percent in that period. When you think about it, that’s actually not too bad considering some of the events we’ve had to deal with recently. Who knew that a major earthquake, massive tsunami and a nuclear disaster would hit Japan, that oil prices would climb to $120 per barrel, and that Greece would likely default on their national debt obligations? In this period, we also saw prices of precious metals like gold and copper hit all time highs. Many food commodity prices were also at all-time high levels sending the fear of inflation ripping through the world.

Throughout this period, our market has been very resilient almost carving its own path. Market turnover continues to be healthy and foreign investors continue to take stabs. This is not surprising as the Philippines as a location on the investment map of the world is shining brighter than ever. We have had a series of “firsts” recently. Our recent upgrades by the ratings agencies are a sign that we are on the right track. As many countries in the developed world struggle with their current economic woes, the Philippines and its companies are getting upgrades. Philippine Long Distance Telephone Co. is the first Filipino corporation to receive “investment grade” status from these agencies. In general, what this means is that it is getting less risky to invest in the Philippines and its companies. This means that more serious investors will be looking at the Philippines for opportunities.

This means that our borrowing rates will get lower and our stock market will go higher. This means that our currency will likely strengthen. You want growth? We’ve got growth. You want good value?  We have good value.  This period of consolidation we have gone through over the past six months has set the foundation for the market to finally breach the 5,000-point mark.  I think this will happen sometime in the next six to nine months.

The move to a higher valuation must be driven by earnings.  As the second quarter comes to a close, I anticipate that most listed companies will continue to deliver earnings growth similar to that of the first quarter. On average, the PSEI member-constituents delivered 11-percent earnings growth in the first quarter. Property companies and conglomerates delivered the most meaningful growth numbers while the power sector was the drag. Even the mining sector offered up some positive surprises. I think this trend can continue for the rest of the year. I actually expect the power companies to do much better in the second half of the year as the whole sale electricity spot market prices have stabilized at higher levels than in the first quarter.

I also anticipate the government spending program will get moving. The budget deficit for the first half of 2011 was P9 billion. The government forecast a deficit level of P300 billion for 2011.  I guess that means that we must spend P291 billion over the next six months.  Let’s spend but spend wisely. This is a big number and it will surely drive the Gross Domestic Product growth back above 6 percent. Yes, 5,000 here we come!

(The author is the investment director for equity portfolio management for ATR KimEng Asset Management and chairman of its investment committee. For comments, you may e-mail him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .)