The Third Quarter 2015 Philippine Stock Market Report

The Descent Continues

The PSEi continued its descent to the 6,000 level in 3Q15 after peaking in 2Q15 in the 8,000 level.  The weakening of the peso triggered by the devaluation of the Chinese yuan highlighted 3Q15 as well as the renewed drop in crude oil and metal prices and the postponement of the US interest rate hike.  The US Fed pointed out that this will be done within 2015.

PSEi 3Q15

There were lots of breaks from the PSEi’s descent, but it generally continued in 3Q15.  We estimate the pit’s bottom at around 5,500, but the major support is definitely higher than that.  The US interest rate hike is seen to highlight 4Q15.  Thus the PSEi will be generally weighed down this quarter.

Despite the drop of the PSEi from the 8,000 to the 6,000 level, the PSEi PER remains bloated at 19.43x as of the end of 3Q15.  Bargains outnumber premium stocks in our 60-stock coverage.  However, premium stocks outweigh the entire coverage with their high PERs.  The All Shares Index (ASI) traded at 16.77x as of the end of 3Q15.

Our recommendation of keeping a good amount of liquidity at the start of the year with our 50-50 cash-stocks asset mix has proven its worth in 3Q15.  With the PSEi’s descent, investors can average down when the PSEi’s margin of safety increases to Buy levels.  This will eventually give investors’ portfolio a faster recovery than the PSEi.

Since our inception in 2009, this was the first time we recommended a defensive investment portfolio.  Previous ones were all-out offensive as 100% of funds went into stocks and outperformed the PSEi.  Opting for defense in 2015 reminds us that there are cycles we have to adapt to keep our performance at optimum levels.

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.