Brokers expect local bourse to sustain upswing through 2018

Before heading to its final trading week for 2017, the local stock market has gone on a long holiday break to celebrate Christmas.

The Philippine Stock Exchange index (PSEi) is expected to end this year on a positive note and sustain its upswing through next year. Stockbrokerage BDO Nomura, for instance, has projected a rise in the local stock barometer to a new high of 9,100 by next year on expectations of faster corporate earnings growth.

Since the start of the year, the PSEi has racked up a total of 1,591.67 points or 23.3 percent from its finish of 6,840.64 last year. On the contrary, the stock barometer slipped by 1.6 percent in 2016 and 3.85 percent in 2015.

Last week, the Philippine Stock Exchange index added 95.27 points or 1.14 percent to close on Friday at 8,432.31.

In a recent press briefing, Nomura senior economist for Southeast Asia Euben Paracuelles said the Philippine infrastructure story would continue amid a still “pretty solid” growth trajectory and supportive external backdrop.

Despite rising inflation and interest rate, BDO Nomura Securities research head Dante Tinga Jr. said the outlook for the stock market was still bullish as index-weighted core earnings per share in the Philippines would likely surge to 13.9 percent next year compared to just 5.3 percent this year.

“The acceleration in earnings growth should more than offset the risks associated with rising inflation,” Tinga said.

Nomura sees Philippine inflation rising next year to 4.3 percent from 3.2 percent this year—higher than market consensus and also exceeding the central bank’s 2-4 percent target range—partly due to the pickup in oil prices and pressures for an economy that’s rising faster than its potential, Paracuelles said. The economist said this would likely prompt the Bangko Sentral ng Pilipinas to jack up interest rates by a total of 100 basis points or about 25 basis points every quarter next year.

On the other hand, Nomura sees the Philippine economy expanding by 6.9 percent next year, upgrading its forecast from 6.8 percent earlier. This year, growth is seen to average at 6.7 percent for the full year.