Philstocks Financial, Inc. is projecting the Philippine Stock Exchange index (PSEi) to end the year within 6,550 to 7,050 on the back of hopes of an improving economy albeit continued dampened corporate earnings.
Before the coronavirus disease 2019 (COVID-19) pandemic, Philstocks had projected the PSEi to hit 8,700 to 8,800 in 2020. But due to the economic disruption, the brokerage said it is no longer optimistic about corporate earnings for this year.
In a virtual briefing on Monday, analysts from Philstocks said they are seeing PSEi member-companies to average a -20% to +2% earnings by the end of 2020.
The PSEi basket is composed of 30 companies, considered as “blue-chip” stocks, which are selected to represent the movement of the whole bourse. The PSEi closed at 6,150.70 on Monday.
“Our outlook for the second half for the PSEi is it would range from 6,550 to 7,050, and corporate earnings would range from an average of -20% to +2%,” Philstocks Research Associate Piper Chaucer E. Tan said.
He said corporate earnings averaged 25.6% for PSEi companies during the first quarter. This means to get back to the 10%-15% normal earnings growth for PSEi companies, their earnings should grow at least 30%-40% in the second and third quarters.
However, Philstocks expects that the second quarter would be the worst-performing for most listed companies, as this period would account for the bulk of the lockdown when most business sectors were not allowed to operate.
“We expect most companies would be on the negative side. Those resilient sectors would be on the positive (side), but not as stellar as during pre-COVID crisis,” Mr. Tan said.
Philstocks Senior Research Analyst Japhet Louis O. Tantiangco said the possible growth of the PSEi would depend on the country’s economic performance. If recovery in the second half moves faster than previous quarters, the PSEi may wrap the year up closer to the 7,050 end. If recovery is slow, the PSEi may close nearer to the 6,550 end.
The worst-case scenario would be if earnings in the second half continue to decline. In this case, Mr. Tantiangco said the PSEi might fail to reach the 6,550 to 7,050 yearend projection of Philstocks.
Philstocks Research Associate Claire T. Alviar said recovery hopes would remain to be the primary driver for the PSEi to rise in the coming months. If third-quarter earnings begin to show signs of recovery, the market may start attracting more investors.
However, she said if the COVID-19 tally would continue to climb, investor sentiment may remain low due to lingering worries of a reimposition of a strict lockdown.
Local COVID-19 cases stood at 67,456 as of Sunday while global COVID-19 cases hit 14.51 million as of Monday. By: By Denise A. Valdez, Reporter|bworldonline
Source: Peso Economics
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