The Philippine Stock Exchange index (PSEi) is expected to hit 9,000 next year as earnings growth reached 12 percent, similar to this year’s expectations, according to BPI Securities.
“Next year’s growth is likely to be fuelled by banks, property and the resurgent consumer sector,” said Haj Narvaez, BPI Securities president.
“We are currently trading at around 16x forward earnings, near the market’s 10-year average. Amid strong earnings and macro growth, the backdrop for 2020 appears more attractive than the present year and we think the PSEi can trade around 18x, translating to an index target of 9,000 for 2020,” Narvaez told reporters at the sidelines of BPI Securities’ investors briefing yesterday.
Narvaez said the Philippines may look especially attractive in case the trade war between the United States and China worsens given the country’s minimal reliance on exports.
Furthermore, potential rate cuts from both the US Federal Reserve and the Bangko Sentral ng Pilipinas will support riskier assets like stocks and provide a cushion against slowing growth globally.
“The country’s macroeconomic picture for 2020 looks promising. We believe the uptick in government spending and continued rise in consumption will drive the country’s GDP growth, with Philippine Stock Exchange index (PSEi) earnings growth expected to replicate this years’ figure of around 12 percent. It is also worth noting that lower rates tend to be supportive of equities,” said Narvaez.
Despite the positive prospects for next year, Narvaez said volatility is still to be expected due to the US-China trade war. To counter adverse consequences, investors are advised to focus on stocks that offer growth and value.
Narvaez said the market this year is seen to close at 8,150.
“…you have to consider as well the momentum swing. Unfortunately we’re at this period now where there’s a lot of pessimism and that’s not really because of fundamental reasons it’s really more of technical reasons. People have been selling this market because it started off with the fact that foreigners have been selling this market,” he said.
“We think the market could potentially bottom out maybe (at) 7,600, I think there’s support there, optimistically though I think 8,150 is possible assuming there’s a rally sometime in the last month,” Narvaez added.