PSEi may close beyond 7,000 this year

MANILA, Philippines — The Philippine Stock Exchange Composite index (PSEi) is projected to close 2021 at 7,150.00 to as high as 7,750.

This is according to Philstocks Financials’ 2020 review and 2021 outlook titled Hope Amid the Pressing Times authored by analysts Japhet Louis Tantiangco and Claire Alviar.

“With an EPS growth of 20 percent, we project the local bourse to close the year at 7,150.00. Meanwhile, if the 30 percent EPS growth is achieved, the local market is seen to finish the year at 7,750. For 2021, our market’s forward price-to-earnings ratio is estimated at 20.77 times,” they said in the report.

This year, Philstocks said, congruent with the recovery of the local economy, corporate earnings per share are expected to post a growth of 20 percent under the base case scenario and 30 percent under a best case scenario.

“In both cases, we see the further easing of social restrictions that would enable our companies to utilize more of their capacity and achieve economies of scale,” the report said.

Easing of restrictions is also seen to allow more consumption, which in turn would boost companies’ revenues, the report also said.

“Our expectation is also hinged on improving consumer and business confidence. Better consumer sentiment would lead to more spending, which in turn would help our corporates’ toplines. Better business sentiment on the other hand would lead to the pursuance of store-network expansion, production capacity expansion, and other investment plans,” Philstocks said.

However, the outlook hinges on the better containment of the COVID-19 virus in the country, and the availability and roll out of a COVID-19 vaccine.

“The pace of developments would play a key role in our projections. A faster easing of restrictions, virus containment, vaccine roll out, and confidence improvement would give our companies a better chance of achieving a 30 percent EPS growth,” Philstocks said.

Better adaptation to the new normal both by consumers and companies are also seen to help boost earnings.

At the same time, Philstocks noted risks to the outlook.

“Risks against our projection include the resurgence of COVID-19 cases, return to stricter form of quarantine measures, and ultimately, a delay in economic recovery,” it said.

Furthermore, they said, the rising inflation is also seen as a risk as it diminishes the purchasing power of consumers.

In 2020, the market declined near the 4,000 level then   quickly recovered reaching the 6,600 level.

Moving forward, Philstocks said “the market’s strong support is seen at 6,600, while its current resistance is at 7,300.”

If the market breaches 7,700, the next resistance   is  seen at the 7,700 to 7,850 range.

“We are expecting the market’s primary trend to continue going up provided that it would break the 7,300 level in the coming months. If the market fails to break and sustain ground at this level, it is expected to trade sideways, within the 6,600 and 7,300 range. The 200-day exponential moving average will be the PSEi’s dynamic support,” Philstocks said.