Year-end Report: Investors bet on 2010 economic rebound

Company buyouts and takeovers provided excitement to an otherwise lethargic local stock market this year, but investors are betting on improved global economic conditions next year to support the bourse's steady climb. While local share prices did grow by almost two-thirds to 3,052.68 this year, the close was still far from the 2007 finish of about 3,800 points — a record high — before the US-led global economic crisis reared its ugly head the following year. In 2008, the crisis wiped out the previous year’s gains, with the Philippine Stock Exchange index closing at 1,872.85 points. Still, analysts said stock performance this year had exceeded expectations. "The 63 percent gain this year was beyond our expectations, but we expect the market to do better next year," Astro del Castillo, managing director of brokerage First Grade Holdings, Inc., told GMANews.TV. The analyst noted that while world economies would continue their slow recovery next year, conditions would likely be better than this year. On the other hand, brokerage 2TradeAsia expects a volatile stock market during the election season of January to May 2010. “The overall turnout of the automated election process will be key in determining institutional investors’ appetite for local stocks, as well as the general economic theme that will be bannered by the upcoming political administration," the company said in a yearend report. Grace Cerdenia, chief operating officer of 2TradeAsia, said investors should be on the lookout for stocks that have a "solid sequel of events," referring to companies in the process of diversifying or undergoing mergers and acquisitions. She put the market’s immediate support at 3,000 points and resistance at 3,070-3,100. Cerdenia said investors would be closely watching the minutes of the Federal Reserve due on Jan. 6, as well as key US economic indicators such as employment and retail spending data. On the local front, the market would be paying attention to policy rates — expected to remain steady until February — and the "political risk premium" of the May elections, she added. Meanwhile, Harry Liu of Summit Securities said market performance would mainly hinge on global economic conditions. "The focus next year is the economy. There's a good chance that 2010 will be better [both for the economy and the market]," he added. In January to September, the economy posted meager growth of 0.7 percent, lower than the government target of 0.8-1.8 percent. For next year, economic managers expect growth to come in at 2.6-3.6 percent. “If everything turns out okay — the economy [recovers] and credible and clean elections [take place] — then the trend next year is upward," Liu said. “2008 was like a year when a building was burned down. 2009 was when we looked at the foundation of the building and 2010 will be for building up," he added. Newsmakers Despite the weak economy, acquisitions pushed the stock market higher this year. “The changing of hands in companies, such as San Miguel’s acquisition of Petron Corp., and two big groups coming into Manila Electric Co. (Meralco), were the big news for the bourse," Liu said. Little-known companies dominated this year’s list of top gainers. A shares of mining firm Atok-Big Wedge were the best performer, with a fortyeightfold increase to P100 as of December 23. It was followed by Macondray Plastics with a twentyfourfold hike in share prices to P60. Liberty Telecoms Holdings was the third-largest gainer with 1,275-percent growth to P2.75. In May, diversifying conglomerate San Miguel said it would buy nearly half of cash-strapped Liberty Telecoms for P2.2 billion. The announcement came following a deal between San Miguel and Qatar Telecom for a joint venture. This year's worst performer, on the other hand, is hotel operator Acesite (Philippines) Hotel Corp., which lost 68.8 percent to end the year at P3. Also on the list of top losers are the preferred shares of Superferry operator Aboitiz Transport System. In April, the Filipino-Dutch firm that sought to acquire Aboitiz Transport backed out of a deal to buy the company for $30 million. KGLI-NM Holdings Inc. was unable to raise money from the debt markets to fund the acquisition. Meanwhile, blue chips were the most actively traded stocks. A shares of San Miguel Corp., which has been aggressively pursuing other businesses outside its core food and beverage, had a total traded value of P93.676 billion. It was followed by market heavyweight Philippine Long Distance Telephone Co. with a value of P89.31 billion. Meralco came in third with P83.08 billion. San Miguel B shares were the fourth most active stock with P79.879 billion, followed by San Miguel Brewery, Inc. with P66.63 billion and Philex Mining Corp. with P49.966 billion. These companies were the most talked about during the year, with San Miguel and PLDT both embroiled in a tug-of-war for a majority stake in Meralco. Meanwhile, San Miguel’s sale of its stake in beer unit San Miguel Brewery to Japanese firm Kirin Holdings Co. Ltd. also made news, as did Pangilinan-led PLDT’s acquisition of Philex. — Cheryl M. Arcibal and NPA, GMANews.TV