PSEi poised for rebound this year

The local stock market is positioned for a rebound this year amid expectations of interest rate cuts and easing inflation, industry stakeholders said.

“Beyond the risks, everything seems to be in place for the PSE index (PSEi) to reach the targets of banks and brokerages ranging from the low of 7,500 to 8,300,” Philippine Stock Exchange (PSE) President and Chief Executive Officer Ramon S. Monzon said in his keynote speech during BusinessWorld’s Stock Market Outlook 2024 forum in Makati City on Tuesday.

The PSEi ended 2023 at 6,450.04, down by 1.8% from its 6,566.39 close in 2022.

“The stock market has been languishing for quite some time. It is only now that we have started to see the market somewhat recovering,” he added.

Mr. Monzon said the Philippine economy’s performance will help boost the stock market this year. The government is targeting 6.5% to 7.5% gross domestic product (GDP) growth this year.

“The country’s economic indicators remain strong. GDP grew by 5.6% in 2023. Nevertheless, it still outpaced major economies in Asia such as China, Vietnam, and Malaysia,” Mr. Monzon said.

Michael Gerard D. Enriquez, Sun Life Investment Management and Trust Corp. president, said his base case projection for the PSEi is at 7,200 this year, while the bull case projection is closer to the 8,000 level.

“The investors are looking beyond inflation. They’re starting to pick up the market slowly. The local investors are really adding up to their position in the local equity market,” Mr. Enriquez said during the panel discussion at the same event.

Inflation averaged 6% in 2023, marking the second straight year that it breached the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

To tame inflation, the BSP hiked borrowing costs by a total of 450 basis points (bps) from May 2022 to October 2023. The BSP kept the key rate at 6.5% — the highest in nearly 17 years — for a third straight meeting in February.

“We continue to have a very positive view of the Philippine equity market this year, and it all starts with the lowering of policy rates and how that could trigger investors to switch from fixed-income securities to equities,” Mr. Enriquez said.

Market players are closely watching the central bank’s next move as BSP Governor Eli M. Remolona, Jr. has previously said the Monetary Board may consider a rate cut in the second half this year, but inflation should be firmly within the 2-4% target.

Mr. Enriquez noted that strong foreign inflows would lift the stock market.

“There is a lot of foreign buying but in trickles. We want to see them come in big and I think the next one that would make them come in big will be infrastructure,” he added.

BDO Capital and Investment Corp. President Eduardo V. Francisco said that foreign investors are still looking at the Philippines for other opportunities, aside from the stock market.

“For foreign investors, you might not be seeing them coming in on the stock market. But they are coming through other means like loans and investments…They are looking for opportunities. In a way, it’s very exciting,” Mr. Francisco said.

“If we can improve the ease of doing business here in addition to the reduction of stock transaction taxes, those are great initiatives that could make it easier for businesses,” he added.

COL Financial Chief Equity Strategist April Lynn Lee-Tan said several risks could hamper the stock market’s rebound, such as a potential recession in the United States, elevated interest rates, and rising inflation.

“The biggest risk is the US economy and the possibility of a recession or a bear market. The Philippine market always suffers from contagion,” she said. “Other risks include inflation and interest rates. They could disappoint and stay elevated.”

Despite these risks, Ms. Tan remains hopeful the stock market will rebound this year.

“It’s easy to think about a bull case scenario for the stock market because everything seems to be in place. Clearly, inflation and interest rates have peaked this year. It’s not only in the Philippines but also in other countries around the world. With that out of the way, we should see a rebound this year,” she added.

Mikhail Philippe Q. Plopenio, Philstocks Financial, Inc. research and engagement officer, said that the outlook for the local market is “somehow positive” adding that the PSEi could end at the 6,998.70 to 7,665.26 level this year.

The consumer-related sector is expected to flourish this year as inflation is expected to further ease, he added.

“We advise investors to remain cautiously optimistic for this year. We advise investors to somehow limit their risks and diversify,” Mr. Plopenio said.

“The market is already at the bargain levels. Despite the market’s uncertainty, we are positive this year,” he added.

Meanwhile, BusinessWorld Executive Vice-President Lucien C. Dy Tioco said the stock market forum provided an opportunity to examine the bourse’s performance last year and an outlook in the coming months.   

“As the first quarter of 2024 soon completes, we are again at such a fitting time to navigate the current state of the stock market and figure out how this factors into our respective portfolios,” he added. – Revin Mikhael D. Ochave, Reporter