DESPITE the fall in stock prices in the first half of the year, investment bank First Metro Investment Corp. believes stock prices may still return to the 8,000-point level by the end of the year, as investors take their respective positions for the 2019 elections.
FMIC said it is revising its earlier target closing price for the 30-company benchmark Philippine Stock Exchange index (PSEi) between 7,900 points and 8,200 points. The said target is still far below the investment bank’s earlier estimates of 9,400 points for the main index.
Cristina S. Ulang, First Metro’s vice president, said the main index may still end at a stronger note—but not necessarily returning to the 9,000-point level—in 2018 since investors are preparing for the 2019 elections, when spending is traditionally higher than in other nonelection years.
Ulang said the strong Philippine economy, the fiscal policies that continue to support growth, and higher corporate earnings of at least 10 percent growth will all help to lift market prices.
“We believe the stock market will bounce back strong and reach our projected levels. We think the peso will continue to depreciate, but this will augur well for our economy and for the majority of the Filipinos. We think interest rates will rise but, given the prospects of a global trade war that will become more prevalent in the next months, we think we are seeing a near peak in interest rates in the next two years,” First Metro President Rabboni Francis Arjonillo said during the bank’s midyear briefing.
The PSEi is one of the region’s worst performing stock markets this year, dropping some 23 percent in June to 6,986 points from its peak of 9,058 in January.
As of last week, the main index was down by 13 percent, or 1,159.24 points, since its peak this year. The bank blames higher consumer prices and the depreciating peso—reaching a 12-year low—as the main culprits for the depressed market prices.
As a result of the market jitters, capital raised from both the equities and the debt markets during the first half of the year was only at P327 billion, or 11 percent lower than last year’s.
The equities market, however, has been the brighter spot of the two, already raising P150 billion for the first half of the year, or close to P163.35 billion of capital raised for the entire 2017.
Capital raised from the fixed-income market, or the bonds floated by private firms, incurred a steep drop to just P177 billion, or lower by a third from last year’s figure.
First Metro said it expects inflation figures to taper off during the second half of the year, which will encourage issuers to resume their bond floatation.
“Capital raising is expected to stage a mild recovery, especially in the fixed-income market, to reach a total volume of P773 billion, 7 percent higher than 2017,” it said.