October 10, 2017
9M17 Recap and 4Q17 Outlook
The PSEi finally broke through the 8,000 mark in 9M17. After range-trading from around 7,900 to 8,000, it even went past the 8,100 mark to a then all-time high of 8,322 on September 21, 2017. The rally fizzled, however, in late September when North Korea spooked global equities markets with its persistent nuclear missile tests.
The rally was supported by investor confidence in the Philippine economy as the Duterte administration’s Build Build Build strategy was laid out with infrastructure and mass transportation projects. Philippine stocks were likewise rich in value, and investors positioned heavily in key PSEi components which resulted to the rally.
We fine-tuned our PSEi Bands by using the PSE’s PER instead of Bloomberg’s which was higher by around 1.6x. The latter was deemed unreliable, and the PSE was well inside the Bands when the PSE’s PER was used. For some time when we were off, our analysis was swayed to be bearish. The PSEi is still at high levels, but still has ceiling now.
Notes: As of end-September 2017. Bands fluctuate mainly every week on PER and interest rate movements.
We are more upbeat than cautious in 4Q17. We think ceilings will be tested and fueled by GNI growth which is expected to be reported to be strong again in 3Q17. The concern is the frothy US market buoyed by low interest rates. When this reverses, there will be economic pain especially to those paying mortgages, credit card bills and tuition loans. The scope is aimed more in the US than in PH.
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