The benchmark Philippine Stock Exchange index (PSEi) may end the year within 7,400 points to 7,800 points as spending for next year’s presidential elections is expected to boost economic recovery.
Cristina Ulang, First Metro Investment Corp.’s (FMIC) head of research, noted that economic expansion during an election period is accompanied by a strong earnings per share (EPS) growth, which reached 10 percent and 14.43 percent in the 2016 and 2019 elections, respectively.
“Historically, it means GDP growth has been very strong during election year, 6.7 percent on the average versus the non-election years of 5.2 percent,” Ulang said.
For 2022, she said the EPS growth is projected to hit 28.86 percent. This year, EPS is projected to grow 25 percent, enough to give the PSEi a price-to-earnings ratio of 17 times if it closes at 7,800.
“So it’s a big incentive for seizing opportunities every time the market dips,” she said.
As of the first quarter, the 30-company PSEi posted a 19-percent growth on recurring core income basis, which signifies recovery from the impact of the Covid-19 pandemic starting last year.
“So this is what’s [enabling] the recovery of the PSEi. The main catalyst is the GDP [growth], and the recovery of earnings,” she said.
Foreign funds, however, have yet to return to the market. Foreign sellers sold $2.5 billion, cutting foreign investors’ stake in listed companies to 21 percent, an all-time low dating back to 2013, Ulang said.
On the fixed-income market, Daniel Camacho, FMIC investment banking head, said investors have been taking in more risk.
In February, broker Philstocks Financial Inc. said the PSEi may end the year within 7,150 to 7,750 points if corporate earnings will grow by double digits.
In its research, the broker said its corporate earnings per share (EPS) should grow by least 20 percent this year as its base case scenario and 30-percent increase as its best case scenario.
“Easing of restrictions is also seen to allow more consumption which in turn would boost our companies’ revenues. 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’ top lines,” it said.
The PSEi closed at 7,139.71 up by 17.46 points or 0.3 percent on the last trading day of 2020. The PSEi climbed 54.4 percent from its lowest closing level in 2020 of 4,623.42 on March 19.