The benchmark Philippine Stock Exchange index (PSEi) may rise by about 20 percent to 8,400 points at the end of this year, from the current 7,300-point level, as the country’s pandemic situation is improving.
COL Financial Inc. Chief Equity Strategist April Lynn Tan said investors’ cautious views have already been priced in the market.
COL’s target for the PSEi can be achieved if Covid-19 becomes endemic, the May elections will be peaceful and credible, inflation is transitory and if investors will shrug off higher interest rates.
Tan said the pandemic seems to be winding down as more people are getting vaccinated, the omicron variant is “less severe” and the surges did not last as long as the previous ones.
She also noted that new medicines for the treatment of Covid-19 are also cheaper and more readily available.
Meanwhile, Tan said the stock market, since the 1992 elections, had always performed well prior to, and after, the presidential elections.
“It is easier to be bearish than to be bullish today given the numerous threats facing the economy and the stock market. However, we remain bullish as the threats are already priced in and may not be as bad as they seem,” Tan said in a market briefing.
The rising inflation rate is also seen to be transitory and should ease as the reopening of more economies will address supply chain issues while the strong demand for goods may 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 United States Federal Reserve rates will increase but will stay accommodative.
Also seen to boost the local market is the government’s higher spending budget for 2022, up 11 percent to P5.02 trillion from the previous year, as well as the passage of laws that will encourage foreign direct investments. The lifting of the ban on open pit mining is also seen to be positive for investments and the market.
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.
Its 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 the main index 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 said.
Barredo said the PSEi may get a boost from a US stocks bounce as it reaches oversold level but volatility may come back late into the first quarter or into the second quarter as the US rally is seen to take a pause and as the local presidential elections get underway.
