Asia's most expensive stock market should be out of gas, but there are signs it could have more room to run.
The Philippine stock market, Asia's strongest after Thailand, climbed 33 percent this year and 74 percent since reform-minded President Benigno Aquino took office in July 2010.
The Philippine stock market, Asia's strongest after Thailand, climbed 33 percent this year and 74 percent since reform-minded President Benigno Aquino took office in July 2010.
It's
now Asia's priciest, trading at 17 times projected earnings, nearly
double the Asia-Pacific average, according to Thomson Reuters data.
Brokers doubt the torrid pace will continue but expect modest advances
in line with its strong economy, the fastest-growing in Southeast Asia,
and eye the 6,500 mark in the benchmark index ahead of the country's
first investment grade credit rating, possibly in the next six months.
On Friday, the market nearly hit its recent peak of 5,866.83 points in
the main index after a pullback of around 4.5 percent in four days to
Monday.
Although Goldman Sachs rattled the
market with an underweight recommendation this month, a Reuters analysis
of Philippine companies valued at more than $50 million shows that most
brokers remain bullish.
Over the last 90 days,
broker recommendations have not changed materially, with the average
rating score improving marginally to 2.39 from 2.47, with 1 being a
strong buy.
While equity mutual funds invested
in Southeast Asia have begun to look elsewhere for value, with their
sights set on China and India, there has been no aggressive foreign
selling in the Philippines.
Net foreign buying
Foreigners were net buyers of Philippine stocks in the first two weeks
of December and snapped up 107 billion pesos ($2.6 billion) worth in the
year to Dec. 12, nearly double from a year ago.
"The Philippines will not be the top performer, but it will definitely
be outperforming emerging markets," said Paul Joseph Garcia, chief
investment officer at BPI Asset Management in Manila.
He said the economy, which grew in the three months through September
at the fastest pace since 2010, was likely to remain strong next year,
supported by spending related to congressional elections in May,
infrastructure projects and sustained consumer spending despite global
growth worries.
Reuben Mark Angeles, research
head at First Metro Securities Brokerage Corp. in Manila, expects market
volumes to remain brisk ahead of an anticipated investment grade credit
rating for the country. Japanese fund managers were interested buyers,
Philippine Stock Exchange President Hans Sicat said.
On Thursday, Standard & Poor's became the first among the three
major credit-rating agencies to switch its outlook for the Philippines
to positive from stable, moving just six months after its last upgrade.
It said the country could be awarded investment grade status with
sustained reforms.
But doubts have surfaced on
the sustainability of the rally, with foreign money likely to move to
new high-growth markets as the global economy slowly recovers.
"We do not expect new headlines in the Philippine market in the coming
six months, and so little reasons for new investors to venture
aggressively into the market," said Mixo Das, an analyst at Nomura
International (Hong Kong) Ltd. which has an underweight recommendation
on the Philippines.
But even without hefty
foreign fund inflows, the market may be supported by local investors who
now dominate trade, buying more than P939 billion ($23 billion) worth
of shares up to Dec. 14, data from the stock exchange shows.
Local investors, shunning low interest rates in debt markets, now make
up 55 percent of the equities market volume. Foreigners used to dominate
the market with a 60 to 70 percent share before the global financial
crisis, said BPI's Garcia.
"This market has legs because not everyone is in yet. It is not a crowded market story," Garcia said. — Reuters
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