Stock index seen to vault to 8,500 on easing inflation

MANILA, Philippines — The benchmark Philippine Stock Exchange Index (PSEi) is projected to reach the 8,500 mark by year-end, driven by slowing inflation and more accommodative government policies, a leading stockbrokerage said.

“The assumption that the PSEi would reach 8,500 is based upon first, the slowdown in inflation,” Philstocks Financial Inc. senior research analyst Japhet Tantiangco told reporters.

Inflation eased to 2.7 percent in June, the lowest since hitting 2.6 percent in September 2017, according to the Philippine Statistics Authority.

Philstocks said it estimates inflation to hit 2.5 to three percent this year, lower than its earlier 4.5 percent to 5.5 percent projection.

Tantiangco said slower inflation coupled with accommodative fiscal and monetary policies is seen to drive the PSEi higher.

“The loose monetary and fiscal policy will drive or boost aggregate spending, which in turn will boost corporate margins,” Tantiangco added, noting corporate margins are projected to grow by 10 to 15 percent this year.

In addition, the research analyst said the strengthening of the peso against the dollar is another factor that will help drive the PSEi upward.

“We will have a strong peso at least until the third quarter of 2019 and with the strong peso, foreign investors would be enticed to park funds in the local market,” Tantiangco said.

Philstocks said it estimates the peso to hit 52 to 53 versus $1 by year-end. This is lower than its earlier projection of 53.50 to 54.50.

Despite decelerating inflation, Philstocks said the economy still faces some challenges in the horizon.

“Upside risks remain, however, on account of uncertainties in oil prices in light of prevailing geopolitical tensions and a choppy global economy,” Philstocks said.

Tantiangco emphasized that the PSEi has already been performing well in the first half of 2019 compared to a painful 2018.

The benchmark index ended the first half of the year at 7,999.71, a 7.15 percent increase from the 7,193.68 in the same period last year.

This was pulled by the services index which grew 18.62 percent to end at 1,711.29 in the first half from 1,392,62 last year.

The property index was also a top driver of the growth, posting a 17.80 percent increase to 4,273.77 from 3,549.11 in the first half of 2018.

The financials index was the only sector which ended the first half of 2019 in a decline as it closed 3.36 percent lower to 1,720.08 from 1,779.30.