The benchmark Philippine Stock Exchange index (PSEi) could hit 7,800 points within the year as most of its 30-members have forecast earnings exceeding pre-pandemic levels.
Maybank Securities on Thursday reported the PSEi was likely to post a 15 percent growth this year led by the conglomerate, property and banking sectors.
“We expect 2023 to be a continuation of 2022, in a good way,” its analysts said.
“Amid tapering inflation expectations, a more stable Philippine peso to dollar forecast, a steady regulatory environment and capped flow-driven downside risks to the market, we expect the PSEi’s improving fundamentals to be the key catalyst for this year,” they said.
“As such, our 15 percent year-on-year earnings growth forecast for the market appears achievable as the economy has been fully reopened and is likely to remain open, while the adjustments to the corporate and personal tax rates should enhance corporate and domestic spending, driving economic activity”.
The securities broker said conglomerate sector earnings could grow by 20 percent this year and the property sector by 24 percent year-on-year on the back of normalized operations and construction activity.
The broker’s 22 percent earnings growth forecast for banks, meanwhile, hinges on net interest margin over average earning assets expanding following the 300 basis-point interest rate increase in 2022 and an 8 percent to 12 percent loan growth assumption.
The only exception, according to the securities broker, is the industrials and utilities sector whose forecast earnings were to decline by 2.5 percent year-on-year due to softer coal price forecasts.
The earnings forecast assumes oil at $100 per barrel, a 4.6 percent inflation rate and the peso-dollar exchange rate at P54 to $1.
“The derating of the PSEi in 2022 as a result of the high inflationary environment and weak Philippine peso has opened a buying window for several quality stocks with strong economic moats and multi-year earnings growth profiles,” the broker said.
“We prefer stocks with significant exposures to improved mobility and domestic consumption,” it said further.
Maybank forecasts the country’s economy measured as the gross domestic product (GDP) to grow at a slower rate of 5.5 percent this year, buoyed by healthy growth in domestic consumption.
“Apart from continued improvement in employment rates and sustained OFW remittances, which we expect to grow by 3 percent year-on-year, the reduction in personal income tax rates should boost domestic consumption by 6.4 percent year-on-year,” Maybank said.
