Fund Managers buying stocks ahead of Investment-Grade Rating Upgrade

source: http://www.mb.com.ph/articles/382457/fund-managers-buying-stocks-ahead-of-investmentgrade-rating-upgrade#.UK7yuo6AQ-B

by Ian Sayson  of Manila Bulletin

The Philippines’ biggest fund managers are buying more consumer and property stocks as prospects for an investment-grade credit rating and lower borrowing costs drive the benchmark index to a record.

The Philippine Stock Exchange Index (PSEI) jumped 26 percent this year to a high of 5,500.58 Tuesday, driving valuations to 15.5 times estimates for 2013 earnings, the most among 15 Asian- Pacific markets tracked by Bloomberg. The measure is trading at its biggest premium to the MSCI Emerging Markets Index since Aug. 3 as analysts predict a 12 percent increase in the Philippine gauge’s earnings in the next 12 months.

BPI Asset Management Inc.’s Paul Joseph Garcia is buying food and drink manufacturers as the slowest inflation rate in four months gives the central bank room to cut record-low borrowing costs to shelter the economy from the global slowdown. Metropolitan Bank & Trust Co.’s Allan Yu is investing in homebuilders and retailers amid expectations the Philippines will win an investment-grade credit rating as early as 2013.

“We have started to take positions for the coming year,” Garcia, who helps manage about $18.5 billion as senior vice president at BPI Asset, said by phone yesterday. “The Philippines is still expensive relative to other Asia-Pacific markets but that’s the premium you pay for earnings certainty.”

Garcia predicts the Philippine Stock Exchange Index may climb another 18 percent through 2013 to 6,500. The gauge could rise 5.4 percent to 5,800 by the end of this year, said Yu, who helps manage $10.3 billion at Metropolitan Bank, the nation’s second-biggest bank by assets.

Bangko Sentral ng Pilipinas lowered its overnight borrowing rate for the fourth time this year on Oct. 25 after second-quarter economic growth slowed to 5.9 percent from a 6.3 percent pace in the previous three months. President Benigno Aquino is increasing spending and seeking more than $16 billion of investments in roads and airports to spur economic growth as fast as 7 percent in 2013. The Philippine stock index’s increase this year compares with a 13 percent climb by the MSCI Southeast Asia Index and the MSCI Emerging Markets Index’s 7.1 percent advance. The Southeast Asian measure trades for 14.1 times estimated profit, a 25 percent premium to the emerging-market gauge’s multiple of 11.3.

The 10 largest consumer stocks in the 268-member Philippine All-Share Index including Universal Robina Corp. and Pepsi-Cola Products Philippines Inc. have climbed an average 70 percent this year amid prospects of increased consumption, which accounts for 74 percent of the economy. Growth in second-quarter consumer spending accelerated to 5.7 percent from 5.1 percent the previous three months, government data show.