4Q13 Bubble Troubles
After a run-up to the 6,600 level in October, the PSEi declined a bumpy way down below 6,000 to end 2013. Super-typhoon Yolanda’s damages last November likewise dampened the PSEi in 4Q13. The PSEi could not lift off in the period. As it reaches a PER of 17.50x, the PSEi falls as the S&P Asia 50 index’s average is just 10.50x making the PSEi look very expensive. After reaching its all-time high of 7,404 last May 15, 2013, the PSEi just ended with a 1.32% return in 2013. Still, it is the 11th best stock market in 2013 from the 18 stock markets that we regularly monitor. The Philippines is also the eighth most expensive stock market in the group.
Amidst efforts seen in the market to bring back the PSEi back to 6,000, looming increases in interest rates are seen to weaken the PSEi again. 5,851 is now a support, but the real support is way down at 5,546 where the PSEi PER is at 16.24x. We don’t see the PSEi dropping to the S&P Asia 50 index’s PER of 10.50x since the Philippines deserves a premium for having a GDP growth of more than 6% since 2Q12. Current levels are buying levels, but we see more opportunities and discounts ahead when the PSEi reacts downwards to increasing interest rates. The key in 2014 is for corporate earnings to catch up to bring down the PSEi PER. Quality earnings are seen from 4Q13 to even 2Q14 with the peso weak near PHP45:USD1. A weak peso benefits most listed companies. This factor is what to look forward to for the PSEi in 2014 especially for investors that got caught from the May 2013 downturn.
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