LOW interest rates and falling oil prices will boost stocks this year and brokers are now more bullish that the Philippine Stock Exchange index (PSEi) will continue its uptrend, possibly touching 8,500 points by yearend.
Brokers now forecast the PSEi to range between 7,700 points and 8,500 points by yearend, up from their December forecast of 7,500 to 7,800 points.
Their optimism stems from the current low interest rates which should increase market liquidity and upbeat news like falling oil prices which is positive for the economy.
“Liquidity coming from the quantitative easing of Japan and Europe will be the key growth driver,” BPI Securities Corp.’s Michaelangelo Oyson said.
This means foreigners will have more cash to invest in local issues.
Online brokerage COL Financial Group Inc. added that low interest rates positively impact consumer spending and investment.
COL’s head of research April Lynn Tan said she has raised her estimate for the PSEi to 8,300 points by end-2015 from 7,800 points. The revision is due to the lower risk-free rate assumption of 4.5 percent from 5 percent previously, she said.
“This year, what will drive the market will be liquidity, a factor [that is]due to lower interest rates which makes the local market attractive to invest in.
Other corporates will also be benefitting from falling oil prices which have already dropped 50 percent on a year-on-year basis,” Tan said.
COL also predicts that the PSEi will breach 10,000 points by 2016, or by 2020 at the latest, given that the market has just a short way to go should it hit the 8,300-points target.
RCBC Securities Inc. vice president and head of research Raul Ruiz said they likewise revised their 2015 target for the benchmark index to 7,800 points from the 7,500 to 7,700 range target announced December last year.
Ruiz, AB Capital Securities Inc.’s Joyce Anne Ramos and Oyson all forecast a below-8,000 peak for the market this year— 7,700 points for AB Capital and 7,886 points for BPI Securities.
Ramos said that despite improvement in full-year corporate earnings and positive gross domestic product (GDP) seen this year, the stock market will be facing “heightened regulatory risks” amid pre-election activities and expectations of a rate hike from the Bangko Sentral ng Pilipinas in the second half of 2015.
“For the global markets, though we expect the US Fed to hike rates later than expected (fourth quarter of 2015), we see that oil prices will likely recover in the second half of the year” which can affect local prices and inflation, Ramos said.
Oyson also said BPI is “optimistic, but less bullish” on the economy and expects lower GDP growth. “Will the government deliver the PPPs [public-private partnership projects]? Without them, a 6 percent GDP growth in 2015 could prove to be generous,” Oyson said.
He warned as well that the market bull run is at the “last call of the happy hour,” noting that risks may come from the upcoming presidential elections and firms facing a capital wall, which would mean seeking aid from the market to raise additional capital—both of which can drag the PSEi into a consolidation.
Luis Limlingan, Regina Capital Development Corp. managing director, said that looking at the current momentum of the market, the PSEi may overcome the initial 7,790 points before midyear, but can also break out beyond the 8,000 points-target should the market sustain its momentum and shy away from the potential risks abroad.
However, he added that several foreign geopolitical concerns —renewed European Union crisis, slowdown in China, continued recession in Japan, tensions arising from Russia-Ukraine and the Middle East conflicts, and other market shocks—will still cause day-to-day volatility.
For his part, BDO Capital and Investment Corp. president Eduardo Francisco said they are targeting “around a 12 percent increase” in the main index this year to 8,100 points from 7,230.57 points on the last trading day of 2014.
Among the stocks seen to have strong growth prospects this year are: D&L Industries Inc., Puregold Price Club Inc., Robinsons Retail Holdings Inc., SSI Group Inc. and Universal Robina Corp. for consumer-related stocks; SM Prime Holdings Inc., Vista Land and Lifescapes Inc. and Megaworld Corp. for property; First Gen Corp., Energy Development Corp. and Manila Electric Company (Meralco) for power; GT Capital Holdings Inc. and Ayala Corp. for conglomerates; Cebu Air Inc. for transport; Metropolitan Bank and Trust Company (Metrobank) for banks; and Philippine Long Distance Telephone Company for telecommunications.