DBS: Prepare for a PSEi bull run until 2025

A bull run could extend until next year—with the Philippine Stock Exchange Index (PSEi) projected to reach the 8,000 territory—as lower interest rates hold up an improving economy, according to DBS Bank.

In its “Regional Market Focus” outlook report for the fourth quarter, the Singaporean financial institution forecasts that the PSEi would settle at 7,400 by the end of the year and then breach 8,000 by June 2025.

The positive outlook is supported by easing inflation, which dropped to a four-year low of 1.9 percent in September. A softer inflation gives more leeway for the BSP to cut interest rates further, making loans cheaper for consumers and investors.

The September rate brings the national average inflation for the year to 3.4 percent, which is within the government’s target range of 2 percent to 4 percent.

DBS projects inflation to approach 3 percent before the end of the year.

“The recent policy rate cuts of the BSP and Federal Reserve reinforces our constructive call on the market as the lower risk-free rates provide support for valuations,” the report noted.

The BSP cut policy rates by 25 basis points to 6.25 in August, the first easing in almost four years.

DBS noted the economy was showing “nascent signs of recovery” as key data turned “more favorable.”

It cited, for example, the 2.8-percent growth of imports in the second quarter, an indication that demand is improving.

Retail sales value and volume were also “consistently positive” from April to July, it added.

“We anticipate grocery retailers would deliver high single-digit to low double-digit earnings growth in 2024 to 2026, driven by stronger volumes and margin expansion, helped by the return of supplier support,” the report said.

DBS also sees the growth of inbound tourist arrivals to bring in more revenues.

The PSEi entered a bull market last month when it breached the 7,400 level. For a stock market to be considered in bull territory, it must have risen by at least 20 percent from a recent low.

DBS warned, however, the US elections would have an impact on the local market.

“In terms of the impact to the Philippine economy and regional geopolitics, we are indifferent to whether it is a [Kamala] Harris or [Donald] Trump win, given that the Philippines is an important geopolitical ally,” the report said.

“However, we believe a Harris victory will be good for emerging market equities whereas a Trump win poses a potential negative risk due to potential tariffs and shifts in external trade dynamics,” it added.

The US elections are scheduled on Nov. 5.