The Philippine Stock Exchange index (PSEi) is projected to reach 7,500 this year with foreign buying heating up and the peso making a comeback, according to First Metro Investment Corp. (FMIC).
FMIC research head Cristina Ulang, in a virtual briefing on Wednesday, said the forecast could “happen anytime” this year given the volatility in the local stock market.
“It need not happen toward year-end. This is a volatile market and you must thrive in volatility. And therefore, 7,500 can happen anytime. So be vigilant and do value-hunting,” she said.
On the last trading day of 2022, the PSEi dropped by 0.002 percent, or 0.15 points, to 6,566.39. The main index, which survived a bear market in Sept. 2022, fell by 7.8 percent last year from 2021.
The PSEi is expected to benefit from the further reopening of the global economy, including the economic powerhouse that is China.
“Trade and investments are going to be flowing back, maybe not so fast because COVID restrictions are being lifted slowly. But it is a positive move on the part of China,” she said, noting the positive sentiment could spill over to emerging markets such as the Philippines. This is seen to encourage foreign investors to buy up local shares as they diversify their portfolio.
On the local front, she noted that stocks of conglomerates—which have multiple revenue streams—could be attractive for foreign investors given the upbeat macroeconomic outlook for the country. Those which have exposure to infrastructure especially are seen to rake in more gains as this sector is among the key economic growth drivers.
Apart from conglomerate stocks, Ulang also advised investors to buy shares from the telecommunication, property, consumer, power and energy, mining and oil and banking sectors.
Strengthening peso
Meanwhile, the economic slowdown in the US has resulted in the dollar losing steam. The Philippine peso, in effect, has appreciated, hitting its six-month high this week.
“We are already seeing our very own currency appreciate in value. That is very positive as far as risk assets are concerned here in the emerging markets,” Ulang said.
Nonetheless, the peso would still be in “depreciation mode [due] to persistent uncertainties and aggressive monetary tightening in the US,” FMIC said, projecting the local currency to still trade within P57 to P59 against the greenback.
The research head said the “stubborn inflation” remained the biggest risk that could trigger a selloff in the local bourse. She warned that supply chain-disrupting typhoons could continue to impact consumer prices.
FMIC projects inflation to reach 4.5 percent this year due to higher global oil prices. Inflation hit a full-year average of 5.8 percent in 2022 on the back of expensive food and transport costs. INQ