BROKER Philstocks Financial Inc. sees the benchmark Philippine Stock Exchange index (PSEi) still falling to 6,800 points by August this year before it tries to move up, with a possibility for a year-end close of 7,500 to 7,700 points.
Justino Calaycay Jr., Philstocks head of research, said while the market has shown significant rebound on low volume in recent sessions, people are still not convinced that the market can sustain its growth trajectory.
“Volume is still relatively thin. We’re concerned about the sustainability of the rise,” Calaycay said in the broker’s briefing.
The benchmark index closed 34.28 points higher on Monday to 7,227.96.
Among the challenges to the market is the recent surge in inflation, an environment of rising interest rates that dampen consumer spending, a weak peso, a budget deficit and policy uncertainty of the government, he said.
Japeth Louis Tantiangco, Philstocks analyst, said there are many headwinds to the government’s projection of a 7-percent to 8-percent GDP growth for the year.
“Unfortunately, there are spoilers [to the target]. Now that inflation is creeping in and you look at other headwinds, such as the peso depreciation, perhaps it may not reach the target of 7 percent to 8 percent,” he said.
GDP growth rate could be in the 6.5-percent to 6.9-percent range.
Calaycay said compared to the previous decline of the market, which saw it enter the bear-market territory, that was influenced by external factors. The current bearish sentiments also carry domestic factors like the rise in inflation and political uncertainties.
A bear market is the instance when an index dropped by 20 percent from its highest in a single year.
“Among domestic concerns is the election coming up; the divisiveness is quite evident. At some point, we may show some cracks that might impact the way up,” Calaycay said.
On a year-to-date basis, foreign funds have already pulled out more than P60 billion from the market compared to a net inflow of more than P20 billion last year.
The index will rise when inflation pressures ease, corporate earnings pick up and the peso recovers or starts to stabilize.