BDO bets on PSEi closing out 2016 at 7,800

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Triggers in place to boost market

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BDO Unibank Inc. is forecasting the PSEi to hit the 7,800 level by year end, and probably to as high as 8,500 to 9,000 in late 2017, leveraging on the long-term fruits of the economy, trade and investment.

“If we were to look at what could trigger the market boost by year end, then you get the passage of the [2017] budget, phase one is passed in terms of tax, prospects of third quarter earnings – [they]could lift the market closer to 7,800,” BDO Chief Market Strategist Jonathan Ravelas told The Manila Times after the BDO Nomura Infrastructure Outlook briefing on Monday.

Online brokerage BDO Nomura Securities expects the PSEi to breach the all-time high of 8,127.48 recorded in April last year.

Ravelas said the main PSEi could go as high as 9,000 on expanded infrastructure spending, increased trade and investments, and the overall Philippine story driven mainly by consumption.

Budget Secretary Benjamin Diokno said at the same event the government is boosting infrastructure budget to 5.4 percent of the gross domestic product (GDP) next year, which will further climb to 7.2 percent of GDP by 2022.

The BDO market strategist noted the PSEi is now undergoing “correction” after hitting the year’s high at 8,102.30 in July, weighed by “uncertainties” from a potential interest rate hike by the US Federal Reserve later this year.

Some investors have discounted the “political risk” associated with the temporary the new administration’s economic policies, but Ravelas is betting on a stock market boost after the 2017 national budget and phase one of the comprehensive tax reform package are passed in Congress.

“It’s still the Fed that is driving all the uncertainty. And then there’s the US elections, again making the market a bit jittery. With that said, if the budget gets passed early, the phase one is passed in terms of the tax, then no reason to doubt the Philippine story,” Ravelas said.

On the foreign exchange, Ravelas see the Philippine peso to close the year out at $47.50 against the dollar and further depreciating to $50:1 in 2017 given the risk of higher interest rates from the Fed and the Bangko Sentral ng Pilipinas.

BDO Nomura noted better prospects for the holding firms, property, and infrastructure sectors, particularly Ayala Corp., SM Investments Corp., Ayala Land Inc., Robinsons Land Corp., International Container Terminal Services Inc., Petron Corp., and Cebu Air Inc.

The online brokerage gave equities of consumer, public utility, power, banking and telecommunications companies a neutral assessment at this point.

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