Philippines Upgrades, says First Metro Investment

Makati-(PHStocks)-In a press briefing, First Metro Investment Corp. (PSE: FMIC) maintains its positive outlook for the Philippine economy and is confident that the country will get an upgrade before the end of the year. From an earlier forecast of 5-6%, GDP growth is now projected to be stronger at year end at 6-7% as government expenditure is expected to further escalate and solid consumer spending to persist.

First Metro President Roberto Juanchito Dispo said, “Our GDP growth is the second highest in Asia in the first quarter and the rest of the year will continue with a robust growth fuelled by the surge in infrastructure expenditure, continued unyielding consumption, a strong BPO sector, a recovery in export, lower oil prices, a surging tourism industry and a strong financial market.”

Inflation will even be lower than the early year forecast of 3.5-3.7%. It is seen to ease at 3.2% to 3.4% levels as crude oil prices continue to go down to $100/barrel from a high of $123/barrel and rice output promises to be strong in the remaining half of the year.

OFW remittances will continue to rise to 5-7% despite a slight downturn in 2011.

With the sure recovery of the US and a stimulated domestic demand in East Asia, exports may regain momentum of 1-4% growth despite a slowdown in the second quarter.

In the wake of a negative growth prospect in Europe in anticipation of a fall out from a likely exit of Greece, investors will continue to seek a safe haven in the US dollars. Thus, the peso is expected to depreciate with the strengthening of the US dollars. Peso-dollar rate is projected at P42-P44 to a dollar.

The financial market will remain attractive as tremendous liquidity will persist with high savings rate and interest rates will remain low. Demand, on the other hand, will fail to absorb this liquidity despite the increases in bank loans and corporate debt issuances. Government borrowings will also continue to be a non-factor with the budget deficit pegged at only 2.6% of GDP or P279 billion. T-bill rates are projected as follows: 91-day at 3%, 5-year at 4.75%, 10-year at 5%, 20-year at 5.6% and 25-year at 6%.

First Metro remains bullish in the equities market as it believes the Philippine Stock Exchange Index (PSEI) will hit the 5,500 level, higher than the January forecast of 5,000, and price earnings ratio 13x, assuming corporate earnings grow 12-14% at year end. Sectors that are likely to outperform the index include infrastructure, gaming, mining and the consumer sector.

Dispo also anticipates robust activities in the capital markets. “Corporate issuances are expected to bulge in the second half of 2012, particularly in the consumer/retail sector. A number of refinancing and M&A transactions are forthcoming, retail bonds issuance, IPOs and follow-on offerings are also in the pipeline. A credit upgrade will definitely open up new investor base,” he said.

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