The Philippine Stock Exchange (PSEi) benchmark index could hit 7,800 points this year as most of its 30 members are set to report gains above pre-pandemic levels.
Maybank Securities said in its report that PSEi will grow 15 percent this year, led by the conglomerate, real estate and banking sectors.
“We expect 2023 to be a continuation of 2022 in a good way,” the broker said. “Amid falling inflation expectations, a more stable Philippine peso-dollar forecast, a stable regulatory environment and limited flow-related downside risks for the market, we expect PSEi’s improving fundamentals to be the key catalyst for this year.”
“Therefore, our 15 percent year-over-year earnings growth forecast appears achievable for the market as the economy has fully reopened and is likely to remain open, while adjustments to corporate and personal tax rates should boost corporate and domestic spending, driving economic activity.”
The PSEi closed down 124.19 points on Thursday and closed at 6,833.53 points.
The broker said earnings of the conglomerate sector could grow 20 percent this year, while the real estate sector could grow 24 percent year-on-year on normalized operations and construction.
The 22% earnings growth forecast for banks, meanwhile, is dependent on the net interest margin rising above average earning power after the 300 basis point rate hike in 2022 and an assumption of 8% to 12% loan growth.
The only exception, the broker said, is the industrials and utilities sector, which is forecasting a 2.5 percent year-on-year earnings decline on weaker coal prices.
Earnings forecasts assume an oil price of $100 a barrel, inflation at 4.6 percent and a peso-dollar exchange rate of 54 pesos to $1.
“The 2022 PSEi downgrade as a result of the highly inflationary environment and weak Philippine peso has opened a buying window for several quality stocks with strong economic moats and multi-year earnings growth profiles,” the broker said.
“We prefer stocks with significant exposure to improved mobility and domestic consumption.”
Maybank expects the country’s economy, as measured by GDP, to grow at a slower rate of 5.5 percent this year.
“Apart from the continued improvement in employment rates and ongoing OFW remittances, which we expect to rise 3 percent year-on-year, cuts in personal income tax rates should boost domestic consumption by 6.4 percent year-on-year.”