Leading online stock brokerage COL Financial expects the Philippine Stock Exchange index to rise to as high as 7,400 within the year on the back of stronger-than-expected liquidity flows and investor risk appetite.
In a briefing last Tuesday, COL Financial head of research April Lee-Tan said the brokerage had upgraded this year’s index outlook from the earlier forecast of 6,500.
This new forecast is based on a bottoms-up approach that takes into account an upgrade in COL Financial’s fair valuation on most index stocks under its coverage without considering the price-to-earnings (P/E) figures.
But at 7,400, Lee-Tan said this would translate to a P/E ratio of about 21x, which would still be lower than the 27x ratio seen just before the Asian financial crisis erupted.
“Despite the PSEi’s seeming unattractive valuation, we think there is room for prices to go up. The Philippines has a positive long-term outlook and boasts of relatively attractive fundamentals globally. Interest rates will also most likely remain low for the rest of the year, sustaining the prevailing liquidity-driven rally,” Lee-Tan said.
But she warned that the market would still see a lot of volatility as the economic conditions of developed countries remain fragile.
In terms of stock picks, COL Financial favors Metrobank and Banco de Oro among the banks. On consumer plays, its best bets are Puregold Price Club, SM Prime Holdings and D&L Industries. It also favors Alliance Global Group Inc. as a consumer and tourism play, Metro Pacific Investments as an infrastructure play, while Meralco and PLDT were favored as dividend plays.