Unicapital lowers PSEi year-end forecast to 7,100
Unicapital Securities Inc. has downgraded its year-end projection for the benchmark Philippine Stock Exchange Index (PSEi) to 7,100 from 7,300 after factoring in global trade tensions.
Peter Garnace, Unicapital equity research analyst, told reporters on Wednesday they had also trimmed their earnings growth forecast to 8 percent from 10 percent previously.
According to Garnace, this is due to the potential impact of US President Donald Trump’s new tariffs on export-oriented sectors.
Still, Unicapital’s new index forecast is based on a price-to-earnings ratio of 12x. This means investors are willing to pay 12 times a company’s current earnings for its stock, signaling market optimism.
The forecast also implies a growth of 8 percent from the PSEi’s 2024 closing value of 6,528.79.
“We are expecting sectors such as consumer and REITs (real estate investment trusts) to benefit from easing inflation and the declining interest rate environment,” Garnace said during their mid-year media briefing.
In the first half of the year, domestic inflation averaged 1.8 percent, its lowest first-half average in a decade. This is below the government target of 2 to 4 percent.
As a result, Unicapital cut its year-end inflation forecast from 3.1 percent to 2 percent, driven by lower rice and oil prices. These may also give the Bangko Sentral ng Pilipinas more room to further cut rates by possibly another 25 to 50 basis points, according to Unicapital.
“This creates a more favorable environment for businesses to invest and for consumers to access affordable loans,” it said in its mid-year report.
Should the country see better-than-expected economic growth, lower inflation and lower interest rates, the benchmark index could soar as high as 7,400, representing a 13-percent surge from last year’s value.
But if inflationary pressures, global oil volatility, trade disruptions and geopolitical tensions intensify, Garnace warned the index could reach the bear case of 6,500.
For now, Unicapital advises investors to take cover from potential risks by buying defensive stocks seen to benefit from better consumption.
Its stock picks include AREIT Inc. for its high return potential of 20 percent, Puregold Price Club Inc. for its high dividend yield and Manila Electric Co., also for its high yield and return.
