The Philippine Stock Exchange index, the 30-company benchmark, is expected to climb to 7,700-point level by the end of 2016, boosted by this year’s national elections and strong macroeconomic fundamentals, state-run Government Services Insurance System said Monday.
“This being an election year will be an added boost from election spending. We think that an index target for the yearend somewhere around 7,700 is probably not an unrealistic target,” GSIS president and general manager Robert Vergara said.
Vergara said while PSEi dropped to as low as 6,100 in the beginning of the year, the bellwether could still hit the 7,700 level by yearend, amid calm external environment.
“While it might look unrealistic when we were on our knees at 6,100 not too long ago, now where we are, and with the relative calm in the external environment, I think the Federal Reserve having clarified that it would be slow in its normalization process for interest rates…it is not an unrealistic goal,” he said.
Vergara said the European Central Bank agreed to continue to follow a loose monetary policy to try to get economies and inflation going.
“As well as China stabilizing somewhat and oil prices looking like they’re also finding a stable level between 35 and 40, despite the failure of Doha this weekend, means that we have a much better external environment, so the relative strength of the Philippines in the region as probably the second strongest economy in terms of growth should continue to support what looks like a high PE valuations,” he said.
Meanwhile, GSIS said it still aimed to increase its equity investments up to 25 percent in the medium-term.
Vergara said while the fund was not able to reach the 25-percent equity weight goal for 2015, it ended the year with 18 percent of its equity investments, following no additional holdings as general equity values dropped.
“But that’s still a medium-term goal [25 percent], and that’s why both in the fourth quarter when the stock market corrected and in the first month of the year when we dropped as low as 6,100 or even lower than that, I think GSIS was using that opportunity to increase our weightings,” Vergara said.
Vergara said that in January this year, GSIS added additional 1 percent in its equity portfolio.
“That is why we are a bit happy with our decision, given the very sharp bounce back in markets in March,” he said.
He said the pension fund’s equities were up four percent from end of 2015, showing a first-quarter result of around P31 billion on a consolidated basis.
“This means that if we were about P955 billion to P956 billion [in assets] for 2015, right now we’re about P31 billion [in equity investments]. We’re on track to cracking through P1 trillion assets,” he said.
GSIS’s net income in 2015 dropped to P48.85 billion following weak sales in equity market and failed disposal of real estate properties.