Philippine Stock Exchange Inc. (PSE) Chief Executive Officer Hans Sicat said the nation’s stock market is close to a peak, a day after the benchmark index climbed to the highest level since 2007 versus net assets.
The Philippine Stock Exchange Index (SHCOMP) has rallied 29 percent in the past 12 months through yesterday, the best gain among global equity gauges tracked by Bloomberg, and traded for 2.7 times net assets on March 14. The last time the Philippine index’s valuation was that high, in December 2007, it sank 20 percent in three months.
“We are hoping we are not right at the peak, but we are somewhere building up to the peak,” Sicat said in an interview in Singapore yesterday, without elaborating on the indicators he uses to determine fair value. “In the short term, it’s not too healthy. The nice thing about having a relative bull market is suddenly people take a look at the stock market and say it’s good to participate.”
Foreign investors have purchased $1.5 billion of Philippine shares during the past six months, the most since September 2007, as the central bank cut interest rates to bolster economic growth and President Benigno Aquino lifted government spending to a record. The stock index advanced 0.2 percent to 5,040.22 as of 9:31 a.m. local time after closing at an all-time high of 5,050.99 on March 14.
Sicat, the former chief Philippine representative of a Citigroup Inc. unit from 2000 to 2008, joined the exchange as chairman in 2009. The market capitalization of Philippine equities has almost quadrupled in the past three years.
“He’s right about the valuations being high,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees about $291 billion worldwide. “The market is now pricing a lot of the good macro picture but the changes won’t happen overnight and will take place over time.”
Economic growth slowed to 3.7 percent last year from a revised 7.6 percent in 2010 as Europe’s sovereign-debt crisis cut demand for exports. Gross domestic product will expand at least 5 percent in 2012, a “conservative estimate,” driven by infrastructure spending and expanding trade, Economic Planning Secretary Cayetano Paderanga said on Feb. 28.
Aquino has said he wants to boost the $200 billion economy’s growth rate to as fast as 8 percent. Bangko Sentral ng Pilipinas cut interest rates at its two policy meetings this year, reducing the overnight borrowing rate to 4 percent, the lowest level in a year.
Universal Robina Corp. (URC), the largest Philippine snack-food maker, climbed 87 percent in the past 12 months through yesterday for the top gain in the benchmark stock index. Globe Telecom Inc. (GLO), the nation’s second-largest cellular phone services provider, advanced 73 percent for the second-biggest increase.
The Philippine equity gauge may advance another 5.8 percent in the next 12 months, according to share-price estimates from about 350 analysts compiled by Bloomberg. Earnings may increase 23 percent during the period, the projections show.
Philippine companies “are still growing faster than the underlying economy because we are either growing by introducing more products within the Philippines or ASEAN,” Sicat said, referring to the Association of Southeast Asian Nations.
The Philippine index trades for 15.5 times estimated profit, the highest level since November 2010 and a 42 percent premium versus the MSCI Emerging Markets Index (MXEF), according to data compiled by Bloomberg. The Southeast Asian nation’s $182.3 billion stock market is the 12th-largest in Asia and compares with $3.75 trillion in Japan, the region’s largest.
Philippine companies may raise 197 billion pesos ($4.6 billion) to 198 billion pesos through initial and secondary equity offerings this year, almost double the 107 billion pesos last year, according to Sicat. The number of deals may climb to 85 this year from 55 last year, Sicat said.
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