Swiss bank UBS: Stock index likely to hit 8,900

MANILA, Philippines — The Philippine Stock Exchange index (PSEi) may hit 8,900 this year as foreign fund continued to trickle back to the Philippines after the country’s stock market emerged as one of the worst performers in Asia last year, according to Swiss investment bank UBS.

Jody Santiago, head of Philippines research at UBS Philippines, said foreign investors are revisiting the country as inflows reached $500 million since the start of 2019 after $1.7 billion worth of funds were pulled out last year due to higher inflation and weaker gross domestic product (GDP) growth.

Inflation accelerated to 5.2 percent last year from 2.9 percent in 2017 due to elevated oil and food prices as well as weak peso, while the GDP growth slowed down to 6.2 percent from 6.7 percent.

 “What happened in 2018 is setting us up for a good 2019 because when we had record highs of inflation and record lows of GDP growth foreigners were leaving the market,” Santiago said.

The economist cited higher private consumption, massive infrastructure spending by the administration under the Build Build Build program as well as rising foreign direct investment (FDI) inflows.

Santiago said FDI inflows is expected to reach $12 billion this year after breaching the $10 billion level in 2017 and 2018 due to strong interest from Chinese and Japanese investors.

 “Things that caused the market to be weak in 2018 are all reversing in 2019. So in 2018 we had inflation at I think near 10-year highs and we had consumption growth eight year lows. And going into 2019, we are seeing inflation fall and we hopefully we see growth recover from a low base,” he said.

The PSEi shed 12.8 percent to close 2018 at 7,466.02 from 8,558.42 in 2017 due to jitters from surging consumer prices as well as the trade war between the US and China.

For this year, Santiago said earnings growth is seen faster at 12.5 percent compared to 8.5 percent last year, translating to a price to earning ratio of 19 times.

Sectors that drag the earnings growth include telecommunications and utilities.

He said sectors expected to perform well this year due to faster GDP growth are property, banks, and consumer with higher earnings growth of between 15 and 18 percent this year.