The equities market this year as measured by the Philippine Stock Exchange index (PSEi) could rise as high as 7,500 points, especially if the country’s growth path falls within target range, the First Metro Investment Corp. said on Thursday.
Christina Ulang, FMIC head of research, said corporate earnings are projected to grow 11 percent this year, making possible for the main index, the PSEi, to report 12.6 times to 13.6 times price to earnings ratio.
The PSEi rounded 2023 at only 6,450.04, down 116.35 points or more than 1 percent.
But the benchmark index was up on Thursday by 67.62 points, closing at 6,613.73 points.
According to Ulan, the market is proving buoyant in the run up to the Chinese New Year in February.
“But as soon as inflation disappoints and the GDP (gross domestic product) number comes out (and) not hit the target, there could be a market reaction. Add to that (also should) El Nino proves to be stronger than expected in the first quarter,” Ulang said.
“The policy rate cut could be coming soon, maybe earlier than expected or maybe later, depending on how the inflation picture evolves. We think the January inflation is still going to be on the downtrend and will be supportive of this continuing, ongoing rally,” Ulang added.
According to Ulang, the hoped for easing of bond yields should help boost the attractiveness of the stock market, encouraging issuers to consider equity issuances as a valuable alternative to capital raising.
Daniel Camacho, FMIC head of investment banking, likewise said the anticipated monetary policy pivot and easing inflation could lure debt issuers back to the market and capitalize on reduced borrowing costs.
Such pivot, however, could materialize by the second half this year, a reduction of between 75 and 125 basis points across the curve.
“We see a softening of rates as inflationary pressure decreases. We do not foresee a cut in Bangko Sentral ng Pilipinas (BSP) rates in the first half but possibly one or two in the second half of the year, which will further push rates down,” he said.
Camacho said high rates last year helped temper issuer fund raising activities in the fixed-income market, and helped defer or downsize issuances by tapping bank loans instead.
Issuances last year dropped to only P106 billion versus P327 billion in 2022.
