An investment bank sees the Philippine Stock Exchange index (PSEi) hitting 8,200 points supported by the improving macroeconomic factors, and improved earnings of firms listed at the stock exchange.

A paper released by Maybank Investment Banking Group (IBG) said that at present, the PSEi is trading at a discount in terms of price-to-earnings (P/E) ratio, which gives the stock index a substantial upside potential.
“The PSEi is trading at 12.0 times (x) forward P/E, still a discount to its historical adjusted 5-year average of 14.3x. In this light, we keep our bottom-up based PSEi target of 8,200 for an implied forward P/E of 12.9x,” Maybank IBG said.

The PSEi has been trading between 7,300 to 7,500 points in October.

Maybank IBG sees the local stock market sustaining its rally, citing that the policy rate reduction by the Bangko Sentral ng Pilipinas (BSP) on August 15 was a major factor. The BSP after the meeting of its Monetary Board on August 15 decided to reduce by 25 basis points the key policy rate to 6.25%.

“We are expecting a sustained Philippine equity market rally on an improving macro picture coupled with corporate earnings growth. Note that the PSEi has rallied 12% since the highly anticipated BSP policy cut on 15 August,” it added.

CONSUMER AND ELECTION SPENDING

The investment bank said that an improving macroeconomic environment will push the PSEi to higher levels, and the holiday season and the 2024 election will also see increased spending in the country.

“The Philippine macroeconomic picture continues to improve, driven by decelerating inflation, lower interest rates, and improving consumer sentiment. Inflation decelerated to 1.9% in September on lower food prices,” Maybank IBG said.

“We are already starting to see improvement in the BSP consumer survey. This supports our view of stronger consumption growth during the 4Q24 (fourth-quarter 2024) festive season followed by campaign and election spending in 1H25 (first half of 2025),” it added.

The PSEi’s rally will also be with better earnings of companies listed at the stock exchange.
“Although we could see a pause here on profit taking, the fundamentals and valuations remain supportive of further re-rating. We raise our FY24E (fiscal year 2024 estimated) earnings growth to 13% from 10%,” Maybank IBG said.

(PHOTO FROM PIXABAY)