GLOBAL and domestic headwinds are likely to cap the potential of the Philippine equities market at 7,500 points on the benchmark PSEi, according to “The Market Call,” a joint research report by First Metro Investment Corp. (FMIC) and University of Asia & the Pacific (UA&P) on capital markets.
Uncertainties regarding Philippine foreign policy, the Donald Trump presidency, the Fed rate hike and Brexit, and a weaker Philippine peso, may continue to hound the markets this year, Rabboni Francis B. Arjonillo, president of investment bank FMIC, said on Monday.
Those developments limit the market to test its all-time highs.
“Despite the bright macroeconomic outlook, at least in the next 12 months, our 2017 market outlook is subject to a large degree of uncertainty. We see two scenarios playing out this year,” Arjonillo noted in The Market Call, co-produced by FMIC and the UA&P.
The first scenario, Arjonillo said, presents the “challenging” rate of returns in the first half of 2017 “as investors digest the bulk of the headwinds in the market such as higher interest rates, weaker currency, and fund outflows.”
The more positive second scenario depicts investors getting used to the large degree of uncertainty. “The power of fundamentals should eventually play out.”
“Therefore, outperformance this year will come from a combination of selective picks and active or nimble management. We prefer to reduce exposure as the market strengthens at levels above our 2017 target, and wait for better entry points,” the FMIC president said.
The scenario may take a different trajectory if the perceived market headwinds do not materialize, and the large degree of uncertainty clouding the outlook dissipates or lessens, Arjonillo noted.
“Our picks for 2017 are banks, consumer staples, and infrastructure plays. We will also be on the lookout for mispriced index stocks resulting from outflow-driven sell-offs,” he added.