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Philippine Stocks' Bull Market Rally to Be `Massive,' Macquarie Group Says
The Philippine stock index may climb to a record this year after entering a bull market as President Benigno Aquino’s pledge to cut the budget deficit and raise investments drive earnings higher, Macquarie Group Ltd. said.
The benchmark index will reach 3,900 in the “near term” as economic expansion and earnings growth of 23 percent this year push Philippine stocks into a “massive bull market,” said Alex Pomento, a strategist at Macquarie in Manila. The measure, which peaked at 3,873.50 on Oct. 8, 2007, may extend gains to 4,500 in 2011, he said.
The Philippine Stock Exchange Index rose 0.3 percent to 3,744.01 at the noon close in Manila, driving the measure past the 20 percent gain that analysts define as a bull market. Stock valuations will rise to 15.6 times forecast earnings next year, compared with a 13.6 multiple now, Pomento said.
“The Philippines is at the start of a massive bull market,” he said in an interview in Manila today. “Stock valuations remain undemanding because the government’s economic and investment targets will help sustain earnings.”
The nation’s economic growth accelerated to the fastest pace in three years in the second quarter at 7.9 percent, helping drive the gauge 5 percent higher last week, the most since the week ended May 14, when Aquino won the presidential elections.
‘Jump Start’
Aquino’s plan to seek private partners to build $10 billion of roads, ports and railways will “jump start” economic growth to as much as 8 percent starting next year and until his six- year term expires in 2016, Pomento said. An economic growth of at least 7 percent will help shrink the budget deficit in 2011 to 226 billion pesos ($5.1 billion), or 2.5 percent of gross domestic product, Finance Secretary Cesar Purisima said Sept. 1.
Investors should “overweight” banks, properties and utilities as these industries will benefit from the government’s plan to promote infrastructure, tourism, housing and mining to attract investments and create jobs, said Pomento, who correctly predicted gains in Philippine stocks on Nov. 20.
Aboitiz Power Corp., owner of power plants, and Banco de Oro Unibank Inc., the nation’s biggest bank by assets, are among Pomento’s top five recommended stocks this month. His other picks include Energy Development Corp., the nation’s biggest producer of geothermal power, Megaworld Corp., the second- largest developer, and SM Prime Holdings Inc., the biggest shopping mall operator.
“Earnings estimates are conservative and will likely to be upgraded so those who have stayed out of the market up to now should take advantage of any pullback,” he said.
To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net
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