By Alexandria Grace C. Magno, Reporter
COL FINANCIAL Group, Inc. said the bellwether Philippine Stock Exchange index (PSEi) could reach 7,500 by yearend if the market’s price-to-earnings (P/E) ratio expands to about 12 times from around nine times currently, reflecting stronger investor confidence.
Speaking at the brokerage’s press briefing on Monday, COL Financial Chief Technical Analyst Juanis G. Barredo said the P/E expansion would allow the PSEi to recover to around 6,600, about 3% above current trading levels, before advancing to the 7,500-7,600 range.
According to the brokerage’s technical outlook, the index would first need to break above the 6,570-6,700 resistance range before testing the broader resistance area between 7,460 and 7,560 points.
Mr. Barredo said there is a 25% chance that the scenario will materialize.
“In terms of the percentage-wise chance of it happening, I would say this would be about a 25% chance of the overall condition taking place,” he said.
Separately, COL Financial Chief Equity Strategist April Lynn C. Lee-Tan said the brokerage remains constructive on the Philippine market despite geopolitical uncertainty, adding that oil price movements are likely to have a greater influence on the market than geopolitical developments.
“Notwithstanding the re-escalation of tensions, we remain constructive on the Philippine market,” she said. “We’re more focused on oil prices rather than just the war continuing.”
Ms. Lee-Tan said oil prices have moderated from their recent peaks, which could support economic conditions and eventually help equity markets recover.
However, local fuel prices are set to increase on Tuesday. The Department of Energy said gasoline prices will rise by as much as P3.65 per liter, diesel by as much as P10.68 per liter, and kerosene by as much as P11.77 per liter. The adjustments will bring pump prices in the National Capital Region to as high as P99.75 per liter for gasoline, P101.43 per liter for diesel, and P137.27 per liter for kerosene.
“At the end of the day, it’s all about earnings,” she said. “Higher oil prices are worrisome because of the negative repercussions on the economy. It means rising inflation, a weaker peso, rising interest rates, poor consumer and business spending, and therefore lower profits. But if oil prices go down, it leads to the reverse.”
Ms. Lee-Tan said lower oil prices could support lower inflation, a stronger peso, reduced pressure on interest rates, stronger consumer spending, and improved corporate profitability.
She also cited improving business indicators, saying companies have become less pessimistic as inflation pressures ease. She pointed to stronger manufacturing activity and improving hiring intentions as signs of improving confidence.
“Lower oil prices are enough for businesses to turn less pessimistic, and this is also reflected in the PMI (Purchasing Managers’ Index),” Ms. Lee-Tan said.
She also cited the planned GCash initial public offering (IPO) as a potential catalyst for the market.
“We’ll finally have a large-cap, fast-growing tech stock that is part of the Philippines,” Ms. Lee-Tan said, adding that the listing could encourage more financial technology (fintech) companies, such as Maya, to list locally and attract greater investor interest.
The planned listing of Mynt, the operator of GCash, could surpass Monde Nissin Corp.’s P48.6-billion offering in 2021 as the country’s largest IPO.
For purposes of its Securities and Exchange Commission registration, Mynt used an indicative offer price of up to P10 per share, under which the proposed offering could raise gross proceeds of as much as P92.3 billion if the overallotment option is fully exercised.
Mynt, a partnership among Globe Telecom, Inc., Ayala Corp., and Singapore-based Ant International, operates GCash through its wholly owned subsidiary, G-Xchange, Inc., and offers lending services through Fuse Financing, Inc.
Ms. Lee-Tan also acknowledged risks from geopolitical uncertainty, global market volatility, and future monetary policy decisions by the US Federal Reserve and the Bangko Sentral ng Pilipinas.
In its investment strategy, COL said it continues to favor a mix of cyclical and defensive stocks while recommending that investors keep some cash on hand amid market uncertainty.
“Because we remain constructive on the market, we are maintaining our cyclical stock picks on top of our defensive stock picks. However, given the numerous risks, we recommend keeping some cash, as this can be used as dry powder in case the market goes down,” it said.
