MANILA, Philippines - The Philippine Stock Exchange ended 2012 at 5,812.73, up 33% from 2011, after setting record highs 38 times, the most ever in a single year.
The question is: will the gains last?
Jovis Vistan, director of research at AB Capital, says it likely won't.
"We've been growing too fast. It's hard to sustain growth of 30% primarily because of the concern in valuation. But there will be some sectors that will continue to grow 30%. Certain sectors like consumer, construction and services will continue to show strong growth prospects in 2013," Vistan said.
For 2013, Vistan recommends JG Summit Holdings of the Gokongweis, Lucio Co's grocery giant Puregold, and one of the best performing banks of 2012, Security Bank.
Security Bank helped the financials sub-index outperform the rest of the market this year, alongside property, both rising over 50%, better than the index. The primary reason for that, low interest rates, with four rate cuts by the Bangko Sentral lowering financing costs to a record low of 3.5%.
Developers like Robinsons Land and Ayala Land benefited as their customers could access cheap loans to buy more condos and homes.
Banks like Security Bank, Banco de Oro and BPI also benefited as they too had access to cheap funds, which they could lend out to grow their interest earnings.
Also pushing the banks up, mergers and acquisitions mania, after BPI revealed it was in talks for a possible acquisition of Lucio Tan's PNB.
Will these stocks be stars again next year?
Jomar Lacson of Campos Lanuza says both sectors have the potential to continue to grow next year, with demand still strong for real estate, and investors betting banks may be in play.
But he says the key to the market will be monetary policy.
"What's critical is we need to understand monetary policy, where the direction is, that will dictate the performance of the entire market, whether you are in property or banking or otherwise. At this point there is no indication that the central bank is going to reverse or tighten monetary policy, in fact, chances are they will relax it to manage the strong currency," Lacson said.
Lacson recommends companies with strong potential to see good news next year. He picked Philex Mining, which should benefit from progress in its exploration activities and mining legislation, and Holcim, as both government and the private sector plans to continue to build infrastructure next year.
April Lee Tan, head of research at COL Financial, also says the likelihood of a rate hike next year is very small, but agrees the BSP's policy will be critical for the market.
"Admittedly inflation could pick up, but if ever it is going to be externally driven. But that said, knowing the central bank, if inflation goes up just because of higher commodity prices, they won't hike rates because that wouldn't help the economy," Tan said.
Tan picked two banks, Metrobank and Banco de Oro, as must haves for 2013, as well as Meralco, a good barometer for economic activity given it supplies power to the nation's capital.
Another challenge to overcome - high prices. Nobody is denying that Philippine shares are expensive with investors having to pay more for what they earn per share here than anywhere else in Southeast Asia.
But Mark Angeles, head of research at First Metro Securities, says investors didn't mind prices this year, especially foreign investors who can borrow cheaply as their governments lower interest rates to spur their economies, and will be looking for high yielding assets in emerging and healthier economies.
The peso's strength, which will give foreigners an added forex gain when they buy local stocks with the local currency will also help.
"We see growth continuing in 2013 but its priced in. Flows will likely continue due to QE3 and QE4 and the projected appreciation of the peso, and bond yields will remain low as well too. So we have all those things going on for Philippine equity markets, and that, assuming they stay that way in 2013, we can tolerate higher P/ES," Angeles said.
Angeles picked the nation's biggest conglomerates for 2013, SM Investments and Ayala Corp. and the most valuable Filipino company at the stock market - PLDT. He says it's all about picking stocks best positioned to benefit from the strong economy.