PSEi ex­pected to reach 8,300 level by end-2019

Business World - - Corporate News - By Arra B. Fran­cia Re­porter

BPI Se­cu­ri­ties Corp. projects the lo­cal bourse to reach the 8,300 level by the end of 2019, driven by a re­bound from the con­sumer sec­tor on ex­pec­ta­tions of slower in­fla­tion next year.

BPI Se­cu­ri­ties Pres­i­dent and Chief Ex­ec­u­tive Of­fi­cer Hermenegildo Z. Nar­vaez said the fore­cast is based on in­di­vid­ual out­looks for the dif­fer­ent stocks form­ing the Philip­pine Stock Ex­change in­dex (PSEi).

“Our ex­pec­ta­tion is the mar­ket will prob­a­bly grow in line with earn­ings growth, so this will sug­gest that we’re look­ing at a 9-10% growth over the next year,” Mr. Nar­vaez said dur­ing a yearend mar­ket out­look brief­ing in Makati City on Wed­nes­day.

BPI Se­cu­ri­ties pre­dicts the PSEi will end the year at the 7,650 level.

The lo­cal bro­ker­age is par­tic­u­larly up­beat on the con­sumer sec­tor, which could ben­e­fit from higher mar­gins once in­fla­tion slows down next year. BPI Lead Econ­o­mist Emilio S. Neri, Jr. said dur­ing the same brief­ing that he ex­pects in­fla­tion to fall be­low 4% by the mid­dle of 2019, pre­dict­ing full-year in­fla­tion to set­tle at 3.6%.

Slower in­fla­tion will ad­dress the key con­cern of higher in­put costs that con­sumer com­pa­nies have been ex­pe­ri­enc­ing this year.

“The un­der­ly­ing num­bers for the con­sumer sec­tor is quite strong. If you look at the rev­enue growth of the likes of CNPF and DNL, you’re ac­tu­ally able to see a dou­ble-digit growth,” Mr. Nar­vaez said, re­fer­ring to Cen­tury Pa­cific Food, Inc. and D&L In­dus­tries, Inc.

“It’s im­por­tant to note that given that we’re ex­pect­ing in­fla­tion to slow down, com­pa­nies prob­a­bly should be ben­e­fit­ing from some mar­gin ex­pan­sion in 2019,” he added.

Mr. Nar­vaez also noted the up­com­ing midterm elec­tions will sup­port spend­ing in 2019, fur­ther help­ing boost con­sumer stocks.

BPI Se­cu­ri­ties’ stock pick for the con­sumer sec­tor is CNPF, ex­pect­ing an up­side of 12.3% to P17.50 from its price of P15.58 on Tues­day.

Slower in­fla­tion is also seen to ben­e­fit re­tail­ers’ gross mar­gins next year. Mr. Nar­vaez noted the busi­ness model of re­tail­ers al­ready al­low them to pass on higher in­put costs to end-con­sumers.

“Mov­ing for­ward, they’re go­ing to be able to con­tinue to raise prices. They’ve been able to ab­sorb the in­crease in in­put costs, and the growth of these in­put costs will prob­a­bly slow down in 2019,” Mr. Nar­vaez ex­plained.

The bro­ker­age se­lected Pure­gold Price Club, Inc. as its top pick for the re­tail sec­tor.

Mean­while, the BPI Se­cu­ri­ties ex­ec­u­tive noted in­vestors should be more se­lec­tive when deal­ing with the restau­rant sec­tor. He cited Jol­libee Foods Corp., which has been able to sus­tain healthy same-store sales growth as it was able to pass on higher in­put costs to con­sumers.

For the prop­erty sec­tor, Mr. Nar­vaez said de­mand for real es­tate re­mains strong be­cause of both do­mes­tic and over­seas Filipino buy­ers, along­side de­mand from the off­shore gam­ing sec­tor.

The only con­cern for the prop­erty sec­tor is that pre-sales have been “so strong” over the pre­vi­ous years, rais­ing the ques­tion whether or not this high base can be sus­tained.

“The good thing though is a lot of prop­erty com­pa­nies have an­tic­i­pated this in­crease in in­ter­est rates, so a lot of them are mov­ing away or try­ing to fo­cus less on the devel­op­ment side of the busi­ness and more on the leas­ing side,” Mr. Nar­vaez said.

BPI Se­cu­ri­ties named Ay­ala Land, Inc. as its top pick for the prop­erty sec­tor, ex­pect­ing its shares to rise 21.2% to P51.69 each from its price of P42.65 on Tues­day.

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