BPI Securities Corp. is projecting the Philippine Stock Exchange index (PSEi) to reach 9,000 in 2020, driven by the faster growth of the economy, particularly the banking, property and consumer sectors.
In a statement yesterday, the brokerage arm of Ayala-led Bank of the Philippine Islands (BPI) said earnings growth of the PSEi in 2020 is expected to match this year’s 12%.
“We are currently trading at around 16 times forward earnings, near the market’s 10-year average. Amidst strong earnings and macro growth, the backdrop for 2020 appears more attractive than the present year and we think the PSEi can trade around 18 times, translating to an index target of 9,000 for 2020,” BPI Securities President and Chief Executive Officer Hermenegildo Z. Narvaez was quoted in the statement as saying.
Speaking to reporters at a briefing in Makati City, Mr. Narvaez said BPI Securities’ optimistic outlook is based on expectations of faster economic growth.
“The only problem this year is the budget was not passed on-time. If you look at all the other data, if you look at private consumption, the trade gap was fairly narrow. So assuming government spending is as strong as expected, even if it is slightly below our expectations, I think we’re quite optimistic that 6% growth is quite possible,” he said.
He was referring to the government’s target of hitting a gross domestic product (GDP) growth of 6-7% for 2019.
Mr. Narvaez also said he believes there will be no recession in the United States and the European Union — which is one of the factors driving some investors away from the stock market.
“I think there’s a lot being written about the global economy, especially with regard to the trade war, how that’s going to impact economies… We don’t think there’s going to be a recession in the US and Europe,” he said.
While Mr. Narvaez said the US-China trade war may not likely affect the Philippine economy, he noted it remains a risk to Philippine stocks as it affects investor sentiment.
“Trade war impacts sentiment, which is really getting crucial for our market… (But) in terms of the economy, obviously we’re shielded from that. We don’t have an export-oriented growth model, it’s more driven by consumption. So it’s really more external,” he said.
Despite the rosy outlook, Mr. Narvaez said the market may still be volatile in 2020 until the US-China trade war settles down.
For the end of 2019, he said the main index may still reach the 8,150 level with support at 7,600.
“We think the market potentially will bottom out maybe 7,600… Optimistically though, I think 8,150 is possible, assuming there’s a rally sometime in the last month of the year,” Mr. Narvaez said.
The PSEi closed on Monday at 7,771.62, down 52.97 points or 0.68% from previous trading.
SOURCE: Business World