The Second Quarter 2016 Philippine Stock Market Report

Announcements:

Before anything else, we would like to announce that we are live and active 24/7 at @corpecon in Facebook and Twitter.  Daily commentaries are posted there regarding the PSEi, Philippine stocks and other related issues.  Please see us there.

Now the 2Q16 Review and 3Q16 Outlook:

After starting 2016 on a bearish note, the PSEi rallied from just above 6,000 on February 1, 2016 to almost 8,000 on June 30, 2016.  A generally peaceful elections, a bullish economy and a smooth transfer of power from the previous to the new president strengthened the PSEi.  A dovish US Federal Reserve on raising interest rates and a recovery of crude oil prices from the USD30 per barrel level to almost the USD50 per barrel level likewise spurred global equities.  The Philippine Ten-Year Treasury Note (PH10YTN) rate, on the other hand, fluctuated within the 4% level with less volatility.

PSEi in 2Q16

Our 2016 Stock Portfolio outperformed the PSEi in 1H16.  It was formed in late January when the market was seen oversold.  It is made up of ten high cash dividend yield and low PER stocks.  Its performance includes an average 2.91% yield on 1H16 cash dividends.

2016 Fund Jan-Jun vs PSEi

Our PSEi outlook for 3Q16 is bullish as the low-interest rate environment has now prevailed in the world.  This is supported by economic stimuli arising from countries such as Japan and the continued dovish stance of the US Federal Reserve on raising interest rates.  It seems this will take longer than expected.  The PSEi will generally be in high PER levels.  This is only buoyed by 13 blue chip stocks in our coverage such as JFC, URC, SMPH and ALI.  However, the Philippine stock market still has value with 32 bargain and eight reasonably-priced stocks.  Thus, it is advisable to hunt for value, keep a good amount of liquidity and be wary of the PSEi in overbought levels and euphoric highs.  Its last recent high was at 23x PER in late June.  Prior to that, its last high was way back March 1997 at 27.57x PER.  This was before the Asian financial crisis which brought the PSEi tumbling down to 15.74x PER.  Circumstances then were different, but we still have to be wary as we are treading on high PER levels from the short to the medium term.

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.