PSEi to fall to 6,800 but end year at 7,700

Online brokerage firm Philstocks Financial, Inc., expects the Philippine Stock Exchange index falling to a low of 6,800 by August but sees it rebounding and may end the year in the 7,500 to 7,700 range.

In a press briefing Philstocks Head of Research, Justino Calaycay Jr. said noted that, even though the market has regained some of its recent losses, trading volume has been low.

He explained that this indicates that “people are still not convinced” that the market has shaken off the drag. “Volume is still relatively thin, we’re concerned about the sustainability of the rise,” said Calaycay.

Factors weighing on investor sentiment include the spike in inflation, rising interest rates that dampen consumer spending, a weak peso, the budget deficit, and policy uncertainty of the government, said Calaycay.

Philstocks Analyst Japeth Louis Tantiangco said that, while the government projecting a 7 to 8 percent economic growth, “there are spoilers (to the target). Now that inflation is creeping in, and you look at other headwinds – peso depreciation, and other factors, – perhaps it may not reach the target of 7 to 8. More in the 6.5 to 6.9 range.”

Calaycay also pointed out that, while corporate earnings were expected to rise 20 percent, the companies Philstocks is monitoring only eked out a profit growth of 8.6 to 8.7 percent.

On the other hand, the Bangko Sentral ng Pilipinas has already raised policy rates twice and may raise it further, contrary to the expectation of a total of 50 basis-point rise in rates for entire the year.

After the traditionally weak “ghost month” which falls on August this year, Calaycay said the market may rebound as inflation pressures are expected to ease while corporate earnings are also seen to pick up.