Stock Smarts Market Outlook 2014 (Part 2): BPI Trade 's Mike Oyson - Marvin Germo

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Stock Smarts Market Outlook 2014 (Part 2): BPI Trade ‘s Mike Oyson

By: Marvin Germo | January 23, 2014

I’ve started this outlook series making 2014 as a year of positioning for quality stocks with amazing growth prospects that have been battered down due to foreign selling.  I started things out with how amazing our fundamentals are not just today but for years to come!

For part two of our outlook series , we are starting things with a treat!  It’s an honor to guest the very smart and vibrant CEO of BPI Trade.  His vast experience and wisdom in Wallstreet is worth listening to as I believe He really knows what He’s talking about when it comes to equity markets!

Check out what he has to say!

Just a disclaimer:

This report was prepared by a sales function within BPI Securities Corporation (“BSC”).  Any opinions expressed herein are solely those of the  author and may be different from the views expressed by BSC itself and its other departments, including the research department.

BPI Trade Mike Oyson

1.  What is your outlook for the PSE this 2014?

The external macro environment will not be friendly to Emerging Markets including the Philippines. Foreign funds are leaving emerging markets and are moving to developed markets like the US, Europe and Japan.   In the last few years, emerging markets had been a beneficiary (by default) of poor corporate earnings growth picture in the major world economies.  That scenario is reversing.  What we are seeing is just the unwind of liquidity.

2.  Given that the FED disclosed that they would taper off Q.E., in your opinion what is the effect of this to our market?

 Unfavorable in the near-term because of liquidity moving out of Emerging Markets. Having said, over the medium-term, this QE taper only signals and confirms an improvement in the US economy. The FED would not switch off the liquidity faucet if the US economy was still too tentative in terms of economic expansion. We might just see a repeat of the 1995 to 1997 episode (prior to the Asian Financial Crisis) when emerging markets including the Philippines benefited from a robust US economy.

3.  Sector to watch out for?

You need to continue to have exposure to the Consumer sector. This sector plays well on the big themes including the rising middle class, OFW remittances and BPOs.  Meanwhile, one should be selective on the banking sector. Markets are opening up in 2015 and Philippine banks will have to bulk up to be able to compete more favorably with other banks in ASEAN.  In an M&A scenario, it is generally better to buy the targets (and not the acquirors).

Puregold Stock Pick

Power will also emerge as a big theme in 2014 as more power plants come on stream and as the Philippines deals with a potential power shortage in 2015  (albeit probably not as dire as what we saw in the 90s).

You also have to be cautious on the commodities space. I believe we have entered the down-cycle — albeit market speculation on the passage of the Mining Act could  raise interest in the sector in the interim.

 4.  Will the PSEi again hit 7,400, if so what is the trigger for this to happen?

 Never say never.  The next leg up for the Philippine equities will come from the great rotation from fixed income into equities. When that rotation happens globally, stocks could once again get re-rated. Otherwise, the rise in the PSEi will purely be driven by EPS growth.

 5.  Year end projection of the PSEI?

 The key in 2014 is stock picking.  In my view, we should not focus too much on the index because 2014 could see a repeat of 2013. It will not be a straight line going up. The strategy is to pick the right themes, growth companies and cheap stocks. One can still make money in a flat market.

6.  If there is one stock that you are bullish about what would it be and why?

Medium-term, I am bullish on Puregold. It has recently seen a major sell-off because of foreign funds exiting the Philippine market.  Fundamentally, I believe Puregold plays well into the big consumer thematic of the Philippines– especially if one truly believed in the Philippine economic supercycle.

7.  Message to newbie and veteran investors a like for this 2014?

For the newbies: Put in the time to do the homework. Think long-term.

For the veterans: Humility is a virtue. We can always learn from the market. We should never allow complacency and emotions (including greed and despair) get in the way of good investing.


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