PHILIPPINE DAILY INQUIRER - January 11, 2010

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More vibrant markets seen: PSEi seen challenging 3,800 record posted in ’07

THE STOCK MARKET INDEX IS EXpected to be more vibrant this year, with the PSEi, buoyed by the low interest rate environment, seen challenging the 3,800 record posted in 2007.

According to First Metro Investment Corp., the local bourse will grow further consistent with the anticipated recovery of the global and domestic economies from the recent turmoil.

“Stronger-than-expected recovery and low interest rates will stretch the rally of the equities market this year. We see the PSEi challenging the 3,800 seen in 2007,” Eduardo Banaag Jr., vice president of FMIC, said in a press conference yesterday.

Despite a tough economic climate, the Philippine Stock Exchange saw improvements in share prices last year as the domestic economy managed to avoid a recession.

The PSEi last year stood at 3,052.68, up 63 percent from 1,872.85 in 2008.

FMIC officials said the low interest rate regime would prompt investors, who exercised some caution last year amid the global turmoil, to invest more in the equities market this year.

Low interest yields on fixed-income instruments, including government securities, encourage investors to place funds in equities.

Given this, FMIC president Francisco Sebastian said listed companies could easily attain a 15-percent earnings per share.

“Although the share prices have already recovered from pre-Lehman levels, we still see these increasing further,” Sebastian said in the same press conference.

Sectors that are expected to lead growth this year are power and other utilities, broadcast and mining, FMIC officials said. They said the financial sector would likely remain stable.

These projections are in line with the forecast made earlier by the Bangko Sentral ng Pilipinas.

BSP Governor Amando Tetangco Jr. said liquidity in the economy would be manifested strongly this year through higher investments in the equities market. Investments in bonds will still be substantial, but not enough to surpass the projected investments in stocks.

Analysts said the rising risk appetite of the market would benefit the stock market.

Sebastian, however, said there were risks to the projected surge in stock prices this year—such as faster inflation, which may prompt the central bank to raise interest rates, and a less-than-ideal election situation.

He said the rosy stock market forecast was hinged on the assumption that the elections would be peaceful and credible.