Experts predict reversal of stock market downtrend

PSE file photo

MANILA, Philippines — Stock market experts are raising the likelihood of a rally in the Philippine Stock Exchange index (PSEi) over the next 12 months due to attractive valuations coupled with favorable technical indicators.

A recent report by First Metro Securities Brokerage and Singapore’s DBS Bank increased its year-end 2023 “base case” for the PSEi to 6,850, with a further upside target of 7,400 as relatively inexpensive market valuations “are becoming hard to ignore”.

Analysts Mark Angeles and Estella Dhel Villamiel also released their end-June 2024 base case scenario for the PSEi at 7,050, with a low-end target of 6,350 and an upper-end target of 7,650.

The base case targets for end-2023 and end-June 2024 offer returns of of 6.9 percent and 10 percent over the PSEi’s close on Friday.

Ron Acoba, co-founder and chief investment strategist at stocks research platform Trading Edge Training and Consultancy, said chart-based technical trading indicators were showing some positive signals for the PSEi.

“PSEi is still trading within a primary downtrend as per classical [technical analysis],” Acoba noted in a presentation that was seen by the Inquirer. “Its ability, though, to establish a higher low base positions it for a possible upside break later on”.

While technical analysis is based on several probabilities and outcomes, Acoba said pullbacks or further consolidation for the PSEi is “an opportunity to start loading in the market”.

“PSEi expected to enter into a massive up leg following a short-run consolidation,” Acoba said while noting that 6,400 was the key support area to hold for the PSEi.

Meanwhile, First Metro-DBS noted that Philippine stocks offered greater value relative to so-called risk-free assets such as government bonds.

“With the starting point for valuations already low, we prefer to take advantage of market pullbacks as attractive entry points,” it said in the report.

First Metro-DBS’ top stock picks were AREIT Inc. (target price: P36.70), Bank of the Philippines Islands (P123), Century Pacific Food (P29), Jollibee Foods Corp. (P275), MREIT Inc. (P16.50), PLDT Inc. (P1,470), RL Commercial REIT (P6.50) and Universal Robina Corp. (P160).

“We still expect growth to remain a concern in the next 12 months, but to a lesser degree than initially thought,” First Metro-DBS said. “Indicators have so far held up, increasing the likelihood of a soft landing in the US and a moderate slowdown for the Philippines.”