Investment bank First Metro Investments Corp. remains confident the Philippine Stock Exchange index (PSEi) will close 2021 at 7,800 despite the current consolidation.
The PSEi on Friday closed at 6,786.62.
FMIC said the market’s consolidation has been going on since July when it closed at 6,270.23.
“The local market contracted due to the rise in Covid variant cases, the Fitch credit rating outlook ‘downgrade’ to BBB negative from stable, and the peso’s sharp fall,” it said.
The Metrobank Group-affiliated investment bank however said the market is receiving support from the “sterling earnings of PSEi constituent stocks,” which posted a 252 percent increase in earnings for the second quarter; as well as from “positive prints for the second quarter GDP, employment, and other macro variables.” This is enough for the PSEi to hit between 7,400-7,800 by yearend, it said.
“Thus, we view the upbeat trading range as a base-building phase leading to a robust rebound,” FMIC said.
FMIC said that despite the renewed lockdowns, “business firms appear more confident in boosting their production as vaccination rollouts have started gaining traction.”
FMIC noted that trading volume dropped by 30.1 percent in July, with five out of six sectors having their turnover contract, led by the property sector by 40.7 percent, services sector – 38.9 percent, and industrial sector – 32.9 percent.
The mining and oil sector was the sole sector to post an increase in trade at 3.8 percent.
Net foreign selling reached P9.9 billion in July.
Cristina Ulang, FMIC head of research, earlier said earnings per share growth for the year is pegged at 25 percent, enough to give the PSEi a price-to-earnings ratio of 17x if it closes at 7,800.
For 2022, the PSEi is expected to post an EPS growth of 28.86 percent.
