MANILA, Philippines - The Philippine Stock Exchange index (PSEi) is expected to sustain its growth next year at 8350, supported by an improving US economy and 16 percent corporate earnings growth forecast.
Ismael Cruz, president of IGC Securities, says low inflation, cheaper oil and pre-election year will also boost Philippine stocks next year.
"For next year, we're seeing the seventh year of the bull run, that's a record and we're predicting an index of 8,350. This is based on an earnings growth continuing at 16 percent," he said.
"The best way to estimate the equities market gain is earnings growth. We saw 16 percent last year and our forecast this year is that it will continue at 16 percent. When that happens and as it is forecast now, the impact is on our P/E. We're always quoted as most expensive market at 20 times P/E, but if you factor in 16 percent growth, the 20 times P/E goes down to 17," he added.
Cruz also expects the Philippine economy to grow 6 to 7 percent next year, but still below the government's forecast due to the government's underspending.
But he expects government to improve infrastructure spending in the next two years.
"It's been government expenditure that has been very weak. In fact, in the third quarter, it's negative 2.6 percent. In the first half, it was up only 0.9 percent. So the reason why we have a slower GDP is really underspending on the part of government... I think from the reports from seeing the infrastructure and 12-14 PPP projects well-positioned to be launch in next 2 years," Cruz said. - ANC