Amid the recent strength of the equities market, Philstocks Financial sees the PSEi ending the year between 6,998.78 and 7,665.26 based on its earnings growth projection of five percent to 15 percent for main index members.
“With a robust labor market and easing ination, we expect strong demand within the economy which in turn would trickle down to the revenue of our companies.
“With easing ination, we also expect the increase in production costs to be tempered. All of these would benefit our companies’ bottomlines,” said Philstocks Research Manager Japhet Tantiangco.
He explained that, “Based on our computed target prices for the index members, the PSEi should be at 8,220.26. However, based on the ongoing narratives and the market’s technicals, reaching the said level within the year may not be feasible.”
The local market is currently seen to be optimistic amid expectations that the Bangko Sentral ng Pilipinas will cut rates further and the US Federal Reserve will start its monetary policy easing soon.
“However, investors are also watching out for clues on how much policy easing would be done,” said Tantiangco adding that, “Investors are also watching out for the developments in the general economy.”
Developments in the second half that may push the market up include the inflation rate two percent to four percent target and the BSP continuing its monetary policy easing with another 25 basis point policy rate cut before the year ends.
Also a positive is if th eFederal Reserve starts with its monetary policy easing this month and the local economy growing faster than the preceding year’s 5.6 percent.
Developments that pose downside risk for the market include fears that inflation re-accelerating in the second half, the BSP and Fed delaying their respective monetary policy easing, and if the local economy grows slower than last year.
“For now, we see the possibility of the downside risks occurring to be low. Hence, the market is expected to rally further towards the year’s end,” said Tantiangco.
Meanwhile, Philstocks revised its forecast for the Philippine Peso’s average this 2024 from P54.80 - P55.80 to P56.28 - P57.28, mainly due to the depreciation the local currency experienced in the first half of the year.
However, for the remainder of the year, it projects the Peso to have an appreciation bias backed by a projected positive external position for the Philippines and the expected monetary policy easing of the Federal Reserve.
Philstocks also revised its inflation projection from 3.8 percent - 4.2 percent to 3.4 percent - 3.8 percent as inflation in the first half of the year was tempered despite the impact of El Nino on food and energy prices.
“For the remainder of the year, we expect ination to remain within the government’s target of two percent to four percent. High-base effects, particularly in the months of August and September will play a part in the tempered inflation number,” Tantiangco said.
Philstocks maintains its projection that the Bangko Sentral ng Pilipinas will cut íts overnight reverse repurchase rate by 50 basis points down to 6.0 percent in 2024 due to the easing demand side pressures on prices.
The brokerage upwardly revised its Philippine economic growth projection for 2024 from 5.4 percent - 5.8 percent to 5.7 percent - 6.1 percent due to the faster than expected growth in the first half of the year.