climb

STOCk BrOk er BdO Securities a bigail Chiw, head of research of the broker, said the outlook takes into consideration an earnings growth of 13 percent and investors giving the PSei a valuation multiple of 15 times price-to-earnings from the current 13 times.

Corp. said the benchmark Philippine Stock exchange index (PSei) may close the year at 7,500 points as sentiments may improve despite the lingering fears caused by global headwinds.

Chiw said a “nagging concern” over inflation, interest rate and global growth, stymied the stock market’s rise in the early part of the year with the main index dropping to the current levels of 6,600 points from a high of 7,100 points in January.

The PSei gained 47.61 points on Tuesday to close at 6,672.69 points.

“This is really because of the shock we had during January and February when our inflation came out to be higher than 8 percent. So that affected the market because they think that interest rates will continue to be higher for a longer period of time. So this will affect of course, consumer demand and maybe also business sentiment,” Chiw said.

Chiw said investors’ risk aversion has led to daily market turnover dropping to around P3 billion to P5 billion on an average daily basis compared to P7 billion when investors were optimistic about the market. “a nd also because of higher interest rates, investors right now are putting more of their money in fixed income or bonds securities because this type of security is already giving them very good returns at 6 percent or 7 percent, whereas the earnings yield for the PSei is just about 7-6 percent. Not much difference but the perception is equities is riskier. So, they go with the safer bonds or bond instruments or government securities,” Chiw said.

Chiw, however, said that earnings yield will soon start to trend higher and the benchmark rates trending lower.

“We think we are already trading at very attractive valuations for stocks. We are now 13 times forward P/ e [price to earnings ratio] versus the 17 times historical average. So we think for long term investors that this is already a good time to buy if you if you are believing the potential of the Philippine market,” Chiw said.

“I think the potential catalysts for the Philippine market is when inflation continues to come down, and interest rates start to stabilize, hopefully by the second half of this year. a nd we think these trends would improve consumer and business sentiment, and again, will revive interest in equities,” she added. VG

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