ONLINE stock brokerage firm COL Financial Group, Inc. has set the 7,100 level as its base projection for the country’s main index in 2024, driven by strong economic growth projections.

COL Financial also expects the stock market to reach levels between 8,200 and 9,400, COL Financial Chief Equity Strategist April Lynn Lee-Tan said during a media briefing on Monday.

However, the Philippine Stock Exchange index (PSEi) could drop to 5,800 and go as low as 4,300 if the market is affected by risks, she noted.

“At a base case scenario, the target is 7,100. Where does that come from? Because we’re forecasting a 10% earnings per share (EPS) growth for this year. So most likely it is 7,100,” Ms. Tan said.

“There is a very positive narrative for Philippine stocks that would seem to imply that a bull market is underway this year,” she added.

According to Ms. Tan, the PSEi could reach as high as the 9,400 level if it reverts back to the ten-year historical price-to-earnings (P/E) ratio of 16.2x. Alternatively, it could go as low as the 4,300 level if it posts a 9x P/E and a 10% annual drop in EPS.

She said some of the drivers for the PSEi’s growth in 2024 include slower inflation and interest rates, increased government spending, affordable and under-owned stocks, and the resilience of the country’s economy.

“Philippine stocks could finally enter a bull market this year as the outlook for economic growth looks bright, and as stocks are cheap and under owned,” Ms. Tan said.

Despite the positive outlook, Ms. Tan said the risks faced by the local bourse include higher inflation and interest rates, an escalation of geopolitical tension, negative surprises to the government budget, and the potential impact of a possible recession in the US economy on Philippine securities.

Ms. Tan said that investors are advised to focus on more “defensive stocks,” which are more resilient to economic downturns and those that provide income through cash dividends.

“It would also be wise for investors to keep some cash so they can capitalize on opportunities to buy stocks at even cheaper prices in case they are sold down indiscriminately because of contagion,” she said.

COL Financial Group Chief Technical Analyst Juanis G. Barredo said the PSEi is now working on its third downtrend line, with resistance at 6,700.

“Both the US and the Philippines have stretch marks and could do with some corrections; PSEi support at 6,400-6,300 then 6,100-6,000. Corrections should be taken as better entry windows for positions with potential upsides later at 7,100 to 7,500,” Mr. Barredo said.

“The risk points include slow or delayed rate cuts, US elections, and geopolitical threats affecting supply issues to countries. But keep your eye on the recovery ball and only use corrections as partial profit taking points and/or buy-back windows,” he added.

On Monday, the PSEi dropped by 55.41 points or 0.82% to close at 6,630.68 while the broader all shares index fell by 20.90 points or 0.59% to end at 3,487.71. — Revin Mikhael D. Ochave