PH bourse seen gaining 13% to 15%

FIRST Metro Investment Corp. (FMIC) foresees a 13- to 15-percent upside for the Philippine bourse fueled by rebound of the economy this year.

In a virtual briefing on Tuesday, FMIC head of research Cristina Ulang sees the Philippine Stock Exchange index (PSEi) hitting 7,900 to 8,100 by year-end, with corporate earnings expected to grow by 35 percent.

Price earnings level, on the other hand, is expected to be at 17 to 18 times this year.

The main index closed at 7,122.63 last year, a 0.24-percent slip year on year.

“The biggest event that is yet to be priced in by the PSEi is the fact that we are going to be returning to the pre-pandemic GDP (gross domestic product) by the end of this year,” Ulang said.

The investment banking arm of the Metrobank Group is optimistic of the rebound of the local economy this year, banking on sustained domestic demand, easing inflation and election, and infrastructure spending.

Economist Victor Abola, in the same briefing, forecasted that the country’s economy will grow by 6 to 7 percent by the end of the year.

“At the rate of 6- to 7-percent GDP growth, we will be back to 2019 (levels), hopefully, and so the market is going to price that in,” Ulang continued.

She said the “biggest tailwind” for the market this year election spending.

Ulang added that liquidity will also “remain supportive” and the government’s infrastructure rollout will still be a “big stimulus.”

Aside from the ongoing Covid-19 pandemic, Ulang said the high inflation environment also serves as a risk for the market.

Other key risks, according to Ulang, include high interest rates, global growth slowdown, protectionism, will be high global debt, fiscal blowout, credit rating downgrade and potential power supply shortage.

She then noted that investors should be critical in choosing their stocks and should focus on those that could withstand inflation and rising cost of raw materials, and those that will benefit in an election year, with strong balance sheets, will do well in a high interest rate environment and will yield high dividends.