Philippine Stock Market Research

July 3, 2017

2Q17 Recap and 3Q17 Outlook

The PSEi attempted to break the 8,000 level in 2Q17 but was unsuccessful in doing so.  The PSEi spiked up from the 6,000 level and range-traded in 1Q17.  Buoyed by generally positive 1Q17 earnings results and a still buoyant economy, the PSEi rallied in 2Q17.

PSEi 2Q17

However, there was minimal reason and support to break above 8,000 as the Marawi conflict arose in the period and the PSEi PER was once again one of the most expensive in the world.  Aside from these, the US Federal Reserve hiked interest rates from a range of 0.75% to 1% to 1% to 1.25%.

The 2017 stocks portfolio generated a 9.8% return at the end of 1H17.  This is below the 14.7% and 12.9% returns of the PSEi and ASI, respectively.  The 2017 stocks portfolio generated an 8.5% return from share price appreciation and a 1.3% cash dividend yield at the end of 1H17.  FGEN mainly dragged the 2017 stocks portfolio as its share price dropped from PHP22 in December 29, 2016 to PHP18.90 in June 30, 2017.

2017 Stock Portfolio vs PSEi 1H17

2017 Stock Portfolio vs ASI 1H17.jpg

Value is still present in the 51-stock coverage with just expensive 15 stocks making the PSEi overvalued.  Stock-picking from 30 stocks trading below 16x is recommended for superior returns.  Philippine economic growth of 6-7% at constant prices bodes well for the PSEi.  However, two more rate hikes expected this year from the US will weigh down on the PSEi.  The PSEi is seen to seek a stable support level in 3Q17.

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