The Fourth Quarter 2014 Philippine Stock Market Report

Bulls Capped and Corralled in a Range

After the bulls were unleashed by falling interest rates from October to December 2014, they were capped and corralled in a range in December 2014. Overseas markets affected by falling crude oil prices mainly weakened the PSEi during the month. Yearend window-dressing duties pushed the PSEi to finish 2014 with an uptrend.

PSEi in 4Q14

Interest rates have been increasing in the tail-end of 2014 signaling a reversal to the PSEi’s uptrend. The biggest adversities the PSEi will face in 2015 are the US Fed’s decision to hike interest rates, Chinese economic slowdown and stock markets negatively affected by falling crude oil prices. It is the direction of overseas markets that will weigh down on the PSEi rather than local developments.

Local developments are brighter due to the weak peso and low fuel prices. Along with expansion projects coming to completion, these will prop up the economy and the PSEi. The Philippines will still be under investors’ radars because of its high GDP growth.  Quarterly earnings results are key this year since the PSEi needs a 30% 2015F EPS growth rate to ease its 21x PER back to rational levels. If the key listed companies deliver on earnings growth, then the party continues. Otherwise, global equities downturns will again reveal an expensive Philippine stock market that can cause heavy net foreign selling.

We’re still firm on our Take Profits recommendation due to the PSEi’s low margin of safety rate and high PER. The best advice now is to keep a good amount of liquidity for buying opportunities on market downturns. It’s 50-50 cash and stocks to start 2015. Use the cash on a depressed PSEi during the year.

The High-Growth Stocks Portfolio turned out the best at the end of 2014. Aside from slightly outperforming the PSEi, it generated a 2.36% cash dividend yield for the year.

2014 High Growth Fund

Disclaimer The Philippine Stock Market Research report is solely for information. It should not be constituted as an offer for solicitation for the purchase or sale of securities mentioned. The information herein has been obtained from sources believed to be reliable. Whilst every effort has been made to ensure accuracy, we do not guarantee the accuracy or completeness of the report. All opinions and estimates expressed herein constitute our judgment as of this date made on a reasonable basis and are subject to change without notice. No liability can be expected for any loss arising from the use of this report or its contents. As this is general information, it does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may obtain this report.