PSE index seen to close at 6,500 level by end of 2023

The benchmark Philippine Stock Exchange index (PSEi) could close the year at 6,500, if economic activity improves, a market expert said.

“If the market could reach the 6,300 to 6,500 level. I would be happy,” BDO Capital and Investment Corp. President Eduardo V. Francisco said during a BusinessWorld roundtable discussion last week.

This would be around 1-4% lower than the PSEi’s 6,566.39 close on the last trading day of 2022.

The PSEi closed at 5,961.99 on Oct. 27, 0.94% lower than the previous day. The benchmark index has declined by 9% since the beginning of 2023.

Mr. Francisco said investors could turn positive on stocks if the gross domestic product (GDP) growth picks up in the third quarter and inflation eases.

“If we have 6% growth for the gross domestic product in the third quarter, plus inflation goes down and we can control that, then (market) optimism will increase,” he said.

The third-quarter GDP data is scheduled to be released on Nov. 9.

The Philippine economy grew by 4.3% in the second quarter, the slowest in two years. In the first half, GDP growth averaged 5.3%.

Economic managers have said GDP has to expand by at least 6.6% in the second half to reach the 6-7% target for this year.

Headline inflation accelerated for a second straight month to 6.1% in September, which also marked the 18^th consecutive month inflation was above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range. This brought nine-month average inflation to 6.6%, still above the BSP’s 5.8% forecast for 2023.

Last week the BSP resumed monetary tightening in an off-cycle move, amid increasing inflation risks. It cited the need for “urgent monetary action to prevent supply-side price pressures from inducing additional second-round effects and further dislodging inflation expectations.”

Meanwhile, Mr. Francisco said that it would be difficult for the local market to hit the 7,000 level before the year ends.

“The 7,000 level is very hard to attain… The volumes are very low. The foreigners are not here. They have been selling. The locals, in fairness to them, they have been the ones supporting the market. But there is not much good news and there is not much movement,” he said.    

Mr. Francisco said he does not see any major movements in the stock market towards the end of the year.

As of end-September, PSE data showed that the average daily value traded declined by 9.6% to PHP 6.6 billion, while total market capitalization rose by 0.9% to PHP 16.7 trillion.

Foreign investors have sold a net PHP 43.8 billion worth of Philippine stocks as of end-September. The rise in US interest rates over the past year has made emerging market equities less attractive to foreign investors.

“I think even without the foreigners, the (local) stock market will be stronger,” he said. — R.M.D.Ochave