BPI Securities Corp., the stockbrokerage arm of lender Bank of the Philippine Islands (BPI), said the local stock market has the chance of hitting 7,500 this year.
Haj Narvaez, BPI president, said while some investors worry about a short-term pullback following the sharp rally since October last year, there remains a strong case for the Philippine Stock Exchange Index (PSEi) to close the year at 7,500 handle.
“There is a possibility for a slight correction or some sideways movement in the near term; it has been a remarkable rally since October. But I still believe the arrow is pointing up until year-end — earnings will grow around 10 percent this year and rate cuts are likely coming. Combined, this is a recipe for P/E multiple expansion,” Narvaez said.
He said the main challenge in the first half of 2024 is low liquidity.
“We’ve seen turnover fall to about P4 billion per day. Back in 2021, we were doing about P8 billion. The low turnover is in line with expectations and a function of high rates offered by less risky assets. We only see it (liquidity) improving meaningfully in the back end of the year or six to nine months after rate cuts occur,” he said.
Given the specter of improving liquidity and increased foreign investor interest, investors should focus on large-cap stocks such as property-focused conglomerates, a major sector in the index, Narvaez added.
“The country will start to see more pronounced improvement in liquidity especially in the second half, or closer to the fourth quarter of this year. And when you have improvement of liquidity, that will probably be accompanied as well by more foreign interest. Typically, foreign funds tend to focus on the large-cap stocks,” he said.
