April 2, 2018
1Q18 Recap 2018 Philippine Stock Market Outlook
The warning of a potential market downturn issued in the 2018 Philippine Stock Market Outlook materialized in 1Q18. After hitting an all-time high of 9,078 on January 29, 2018 driven by euphoria from the implementation of the TRAIN law, the PSEi succumbed to profit-taking on overheating valuations of above 22x PSEi PER. This made the PSEi vulnerable to sell-downs triggered by fears from trade wars and interest rate hikes.
The recommended 2018 stocks portfolio or the 2018 Opportunistic and Defensive Stocks Portfolio outperformed the PSEi and the ASI in 1Q18. The stocks portfolio originated from the Philippine Stocks’ 2018F Price to Earnings Growth and Cash Dividend Yields Part 2 Special Report on December 27, 2017.
They are composed of 15 stocks of equal weighting with opportunistic qualities as reflected by their growth upsides and defensive qualities as provided by their rich cash dividend yields. Five of the 15 stocks registered share price appreciation and lifted the stocks portfolio to a 2% gain in 1Q18.
The outlook for the rest of 2018 suggests a further downtrend for the PSEi to a sturdier support level. This is influenced by generally rising interest and inflation rates and a normalization of the PSEi PER. This presents an opportunity to be able to position in blue-chip stocks that have fallen to bargain levels. Cash dividend yields are likewise rising with the current downtrend. Increasing liquidity for an upcoming stock-picking for bargains and value is highly recommended.
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