PSEi may reach high of 8,000, GDP to hit 7% to 7.5% in 2015—FMIC

MANILA, Philippines—The local stock barometer may climb for the seventh straight year to post new highs beyond the 8,000 level this 2015 alongside sustained Philippine economic gains, according to investment bank First Metro Investment Corp.

FMIC sees 2015 as another year of high-growth and low-inflation for the Philippines. Gross domestic product (GDP) is seen growing by 7 percent to 7.5 percent this year, better than the government’s latest estimate of 6-7 percent, while inflation is expected to soften to 2.7-3 percent.

Backed by such a benign macroeconomic backdrop, the Philippine Stock Exchange index (PSEi) is seen hitting a range between 8,300 and 8,500.

Corporate earnings are projected to grow by an average of 13 percent to 16 percent while investors are expected to accept an average valuation of 19 times earnings per share this year.

“Despite a lower than consensus (GDP) performance in 2014, the outlook for the Philippine economy in 2015 is very positive underpinned by the strong performance of the private sector and a recovery in government spending and public construction.

The country’s economic gains in recent years will be sustained but critical steps have to be undertaken to ensure that these economic gains will continue to benefit us in the long run,” FMIC president Roberto Juanchito Dispo said in a press briefing on Wednesday.

Apart from expectations of accelerated state spending on infrastructure and rehabilitation projects, higher GDP this year is seen to be supported by the resurgence of manufacturing as well as pre-election spending and strong domestic demand.

And even as private consumption continues to rise, FMIC sees bottlenecks in the supply of goods resulting from Manila’s truck ban to ease further, resulting in lower inflation.

The risks to the rosy outlook, Dispo said, would include global economic slowdown, sluggish growth in emerging markets, US interest rates hike and escalated geopolitical tensions in the Middle East.

Locally, the risks would include natural disasters, electricity crisis, continued anemic government spending alongside delayed infrastructure projects, he added.

Meanwhile, the US dollar is seen to further strengthen as a result of an improving US economy. The peso, which averaged P44.39 to a dollar in 2014, is estimated to depreciate to an average of P45-P47 to $1 in 2015.

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