SUN LIFE Investment Management and Trust Corp. (SLIMTC) expects the Philippine Stock Exchange index (PSEi) to reach the 7,800 level next year on the back of expectations of continued recovery in companies’ earnings.

“We expect the market to have a 7,850 target next year, assuming that 17% earnings growth from where it is right now, to be driven by banking and consumer sectors,” SLIMTC President Michael Gerard D. Enriquez said at a virtual media briefing on Tuesday.

On Tuesday, the 30-member PSEi closed at 6,582.38, inching down by 0.04% or 2.82 points from the previous day.

SLIMTC’s forecast would be a 10.2% increase from the PSEi’s end-2021 level.

The benchmark index closed at 7,122.63 on Dec. 31, 2021, which was the last trading day of that year.

Mr. Enriquez said the consumer sector has performed well despite rising inflation.

He said these companies will continue to post strong results as they expect prices to start easing by next year.

“Maybe it’s related to revenge-spending or pent-up demand, but hopefully, next year as inflation continues to weigh down on food and non-food items, then we can expect this consumption spending trend to continue,” he said.

The banking sector has also benefited from improved loan take-ups and higher interest rates, Mr. Enriquez said, as the Philippine central bank continues to tighten its pandemic-driven easy policy to rein in rising prices.

The Bangko Sentral ng Pilipinas (BSP) has hiked benchmark interest rates by 300 basis points since May from record lows in its fight against inflation.

Headline inflation accelerated by 8% in November, the fastest since the 9.1% print during the Global Financial Crisis in November 2008.

For the first 11 months, inflation averaged 5.6%, faster than the 4% in the same period a year ago and well above the BSP’s 2-4% target for 2022. Still, it was below the central bank’s full-year forecast of 5.8%.

Mr. Enriquez said the PSEi’s rebound in the past month will make the market attractive to foreign investors.

“There is a lot of room for foreign funds to start coming in again. I think the only driver for this is once they see the currency stabilizing, rather than what they’ve seen this year, with a significant decline in the peso,” Mr. Enriquez said.

“As the peso starts to appreciate, it (the stock market) is seeing more inflows for foreign funds. This is quite significant for the domestic market because daily market activity is really driven by foreign funds,” he said.

After hitting a new record low of P59 per dollar this year, the peso has rebounded, returning to the P55 level this month.

On Tuesday, the peso closed at P55.90 against the dollar, dropping by 25 centavos from its previous finish of P55.65. — AMCS