The benchmark Philippine Stock Exchange index (PSEi) may still end the year at the 7,000-point level, but this hinges on the country’s economic recovery via the government’s fiscal stimulus and the central bank’s further easing of its rates.
First Metro Investment Corp. (FMIC), the investment banking arm of the Metrobank group, said its target range represents an earnings recovery from an estimated 30-percent correction in earnings per share growth this year and a 28-percent recovery next year.
Price-to-earnings ratio is projected to be 18 times to 19 times.
“The current level of the PSEi creates an opening. It’s a rare buying opportunity for investors, which we have not seen in the last 10 years,” FMIC said during its mid-year economic briefing.
The increase, however, should be supported by fiscal policy drivers including the Bayanihan 2 package of up to P1.7 trillion to perk up consumer demand and the Bangko Sentral ng Pilipinas’s accommodative monetary policy.
Cristina Ulang, FMIC research head, said the low-point in the PSEi is “very temporary” due to the government’s reaction to the pandemic and the low-interest rate environment.
Low interest rates, a lower inflation rate projection of the Development Budget Coordination Committee at 1.75 percent, a stable currency, will all boost the stock market.
“We think the PSEi will be inspired [with all of these] although recently there were attempts to dip into the major support of 5,700 points and then 5,500 because of the worries of the data of the pandemic. We are optimistic that this is very temporary as recovery will happen next year and then earnings will follow,” she said.
The benchmark index closed on Wednesday at 5,995 points, or 41.06 points higher than the previous close.
FMIC said issuances, like initial public offerings and the real estate investment trust sale, that were derailed earlier this year due to the pandemic are expected to come to market in the second half.
Corporate fundraising initiatives, meanwhile, were mostly done in the offshore market during the first half as rates plunged. About 13 companies, which raised $6.8 billion or about P340 billion, tapped the global market.
FMIC said the increased interest in offshore bond issuances is likely to continue for the remainder of the year as previous issuances were met with strong demand from international investors seeking higher yielding assets.
Image credits: Nonie Reyes