PSEi hitting 8,000 not as absurd as one would think, say analysts

Is there a possibility that the Philippine Stock Exchange Index (PSEi) could still secure 7,000 in the next 12 months? For First Metro Securities Brokerage Corp. and Singapore’s DBS Bank, the answer is yes. In fact, reaching 8,000 should also not be written off.

The PSEi last closed above 7,000 on Feb. 1 last year. It was able to touch the psychological level several times this year—albeit unable to hold on to it—with traders becoming more and more disenchanted, if the value turnover is to be believed.

In their latest market report, First Metro-DBS said the benchmark index securing the elusive 7,000 was its best case scenario as a policy rate cut, which is basically in the bag, could fan hopes of an economic rebound especially in the next two quarters.

The bull case of 8,000 may even be hit if the economy grows stronger than expected at above 6 percent in the next 12 months, according to the analysts.

The Philippines’ gross domestic product grew by 5.7 percent during the first quarter, slightly below the 5.9-percent prediction of experts. The government is targeting 6 percent to 7 percent for the entire 2024 and 6.5 percent to 7.5 percent for 2025.

The analysts’ worst case scenario by end-June 2025? The PSEi falling further to 6,000.

First Metro-DBS noted the economic growth narrative in the country has yet to stir excitement especially since household spending grew at a slower pace in the first quarter—at 4.6 percent, the slowest since 2011—signaling reduced economic activity.

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“Nevertheless, we anticipate the business cycle is likely to bottom in the next one or two quarters, paving the way for a recovery toward the end of 2024 or early next year,” First Metro-DBS said.

“Easing inflation and improving household balance sheets should enable purchasing power to improve,” it added.

As a result, First Metro-DBS said investors may shift their attention to cyclical sectors dependent on economic recovery once the BSP starts cutting rates, including property firms and banks, which have mostly been reporting record-high earnings in the first semester.