COL sees PSEi rising to 8,400

By JAMES A. LOYOLA

The Philippine stock market is seen to rise by about 20 percent from the PSEi’s January opening to about 8,400 by yearend as investors have become more bullish as the COVID-19 pandemic is seen to become less of a threat.

In a press briefing, COL Chief Equity Strategist April Lynn Tan noted that investors’ cautious views have already been priced in the market.

She noted that their target for the PSEi is achievable based on certain factors. These include if COVID-19 becomes endemic, there is a credible and peaceful elections in May, that inflation will be transitory, and investors will shrug off higher interest rates.

Tan said the pandemic seems to be winding down due to rising vaccination rate and because the Omicron variant is less severe and the surges do not last as long as previous variants. New medicine for the treatment of COVID-19 are also cheaper and more readily available.

Meanwhile, she pointed out that, the stock market had always performed well prior to, and after, past presidential elections (since 1992).

Inflation is also seen to be merely transitory and should ease as the reopening of more economies will address supply chain issues while strong demand for goods might not be sustained.

Tan said historical data also shows that the stock market goes up despite higher interest rates. This view is bolstered by the belief that the US Federal Reserve rates will increase but stay accommodative.

Also seen to boost the local market is the government’s higher spending budget for 2022 as well as the passage of laws that will encourage foreign direct investments. The lifting on the ban against open pit mining is also seen to be positive for investments and the market.

Meanwhile, COL Financial Management Inc. President Marvin Fausto said their survey of retail investors showed that more than half expect the pandemic to end after the current Omicron wave.

While a lot of investors are concerned over the outcome of the May elections and the COVID-19 resurgence, sentiment has shifted to bullishness.

The survey also showed that, a majority of retail investors remain heavily invested in stocks and even plan to increase their stock exposure in the next three to six months.

Prior to reaching the PSEi’s 8,400 target, COL Chief Technical Analyst Juanis Barredo said it needs to break out of its current consolidation phase and chip off the resistance at the 7,350 to 7,475 level.

“We wish to see a higher-low base to offer a better chance to breakout...then seek out 7,800 to 8,250. Without it, a longer waiting period will surface,” he added.

Barredo said the PSEi may get a boost from a bounce in US stocks as it reaches oversold levels but volatility may come back late into the first quarter or into the second quarter as the US rally is seen to peter out and as the Presidential elections gear in.