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Which PH Blue-Chips Have Become More Affordable as the Stock Market Enters Bear Territory?

The PSE index’s fall to its lowest in 18 months may be worrisome for some but creates buying opportunities for others
By Pauline Macaraeg |

 

 

 

Largely spooked by the continued weakness in the Philippine peso, which fell to a 12-year low earlier this week, the Philippine Stock Exchange Index (PSEi) dropped two percent on Thursday, June 21, moving further into bearish territory.

 

It closed at 7,098.15, the lowest in a year and a half, plummeting 21.6 percent from an all-time peak in January 2018. For stock market analysts, any sustained decline of more than 20 percent from a recent peak signifies the onset of a predominantly bearish or negative mood among investors.

 

But while the huge decline in share prices represents a massive loss in market value, it also creates an unprecedented opportunity for daring investors to buy some of the country’s blue-chip stocks, many of which are included in the 30-member PSE Index. Suddenly, many of the country’s prime stocks have become more affordable.

 

To be sure, because of the market’s decline, share prices of the many blue-chip stocks in the PSE index have also fallen sharply.

 

But beyond nominal prices, an even better indicator of stocks’ affordability is their lower price-to-earnings (PE) ratio, which compares a company’s market value to its earnings. In general, a company with a lower price-to-earnings ratio is preferred to one with a higher multiple.

 

Using data provided by Tsupitero.com, a financial technology company that recently launched a real-time online market data platform for stock market investors, Entrepreneur Philippines compared the PE ratios of the stocks in the PSE index on June 21 and on January 29, 2018, when the PSE index hit an all-time high. We then calculated the percentage change between the two periods and ranked the stocks by the extent of the decline. The resulting table is showed in the infographic on this page.

 

While buying blue-chips is generally a good investing strategy especially for those with a long-term perspective, it could also be risky as the markets could fall further and deeper into bear territory. Still, when markets finally recover, it’s usually the blue-chips that see a rapid rise in share prices because of the inherent value in the companies’ line of business, strategic direction and management capability.

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* The infographic was edited to add the correct last traded prices for January 29 and June 21. An early version of the table showed the PE ratios and percent change. We regret the error.

 

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Pauline Macaraeg is Entrepreneur PH's data journalist. Follow her on Twitter @paulinemacaraeg

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