Even at 7,720, Average PERs Soar Past 1997 Highs!

Below accounts for the PER of the 30 issue basket of the PSEi.

 

Based on 2015 eps, Friday’s (September 23) PERs have flown past January 1997 high at 28.21!!!

But of course, by virtue of playing around with reference points, the PSE’s PER have actually been pegged at the lower 20s (last July). Although even with cosmetic changes the PSEi remains at severely expensive levels.

And the PSE will likely pin those rates until 2Q EPS appears.

The consensus has been saying on record that present prices are pricing in ‘expected earnings’. But as 2015 episode has shown, the PSEi rocketed to 8,127.48 on expectations of a mid-double digit return for the average PSEi issues. This turned out to be not only wishful thinking but totally outlandish. Instead of G-R-O-W-T-H, 2015 eps recorded stagnation. And that’s the reason for PERs 28.21!

Although the PSEi dropped to 6,100 in January, they remained ridiculously overpriced then. How much more today?

And as I earlier noted, even 1Q 2016 reported an eps growth (-5.5%) contraction. It’s only 2Q 2016, which outperformed (+12.3%) but mainly from contributions of a few issues (whose eps growth suddenly boomed).

Yet the number of issues, which reported growth contractions (9 issues) swelled even larger than 1Q 2016 (7 issues)—yes in the face of a 12.3% eps growth! The asymmetric growth levels tell us of the nature of eps growth—they were mostly accounting profits.

In short, the reason for the sustained mispricing has been for the mainstream to overstate growth expectations that have the only paved way for massive pumping or price multiple expansions.

Since 2013, activities at the PSE have hardly been about G-R-O-W-T-H but about massive asset inflation (bubbles) justified on G-R-O-W-T-H.

Partly because of the inclusion of SECB, and because of this week’s 2.25% pump, at 7,720, the PSEi’s PER should be at new record highs!

And a significant reason why the PSEi has become very pricey has been because of the wonderful orchestrated, concerted and synchronized and very rampant price fixing process.

As further proof, no less than 4 of the 5 days last week has exhibited a combination of afternoon delight maneuvering backed by marking the close pumps.

Like ad hominem politics, the essence for such actions has been one of the expectations of something for nothing. And something for nothing extrapolates to the predilection of short-termism where manipulations (and murder in substitution for drugs) would have only pleasant outcomes.

Of course, short-term orientation did not just appear out of the vacuum. They had to be shaped. They have been shaped by trickled down negative rates policy of the BSP that has only whetted on the casino impulses in domestic asset markets (stocks, bonds, and properties). And it’s also why addiction to one-way trades has impelled local punters to concoct desperate measures.