Asset management and trust firm Sun Life Investment Management and Trust Corp. (SLIMTC) sees a potential upside for the local equities market.
SLIMTC said the index could hit 7,200 this year on government’s continued infrastructure spending and the tailwind of the Bangko Sentral ng rate cuts.
Richie Teo, SLIMTC chief investment officer, said these factors could help perk up consumption and private spending that would in turn lead to a 6- percent GDP growth for the year.
The lower interest rate regime, coupled with a lower inflation rate, pegged at an average of 3.8 percent for the year, will provide companies for growth potential and likely help them post an earnings growth of 8.4 percent.
A 7,200 level would translate to an price-to-earnings multiple of 12.5x, Teo said.
SLIMTC expects the BSP to start cutting rates by the latter part of the second quarter, “more of June than April,” according to Teo.
“We anticipate a total of 100 basis points of cut for 2024 which will further provide liquidity in the system,” he said.
The BSP’s rate cut is anchored on the US Fed’s “three or four rate cuts” starting by the middle of the year, or around 100 basis points.
Teo said the government’s infrastructure spending remains the biggest catalyst to investments.
However, Teo said foreign funds’ inflow is a necessary ingredient for the Philippine Stock Exchange to hit 7,200 this year.
As it stands, Teo said the local equities market remains “cheap” compared to the likes of Indonesia, Taiwan, South Korea.
