By Arra B. Francia, Senior Reporter

LOCAL brokerage firm Philstocks Financial, Inc. revised upward its yearend target for the Philippine Stock Exchange index (PSEi) to 8,500, banking on the continued slowdown of inflation and better earnings in the second half of the year.

In a media briefing, Philstocks Research Associate Japhet Louis O. Tantiongco said they now project inflation to settle within the 2.5-3% range. This is lower than the company’s forecast of 4.5-5.5% back in January for a yearend PSEi close of 8,400.

“The assumption that the PSEi would reach 8,500 is based upon first the slowdown in inflation,” Mr. Tantiongco told reporters after the briefing in Pasig City on Friday.

The company’s new target came alongside the release of official inflation data for the month of June by the Philippine Statistics Authority, which showed the average increase in prices of goods and services settling at 2.7%. This is lower than May’s 3.2% and June 2018’s 5.2%.

“Now if we have low inflation together with the accommodative policies of the government, such as monetary and fiscal…this will boost aggregate demand, aggregate spending — extend corporate margins so with that corporate margins will climb to 10-15%,” Mr. Tantiongco explained.

In terms of economic expansion, Philstocks trimmed its gross domestic product (GDP) growth forecast to 5.9-6.3%, lower than its estimate of 6.2-6.7% last January.

Meanwhile, Philstocks also expects the peso-to-dollar exchange rate to stay within the P52-53 level then close at P52.37 by the end of 2019. This is seen to encourage more foreign investors to park their funds in the local bourse.

Its target for corporate margins remain the same at 10-15%, while the PSEi’s weighted average earnings per share is seen to grow by 7.7%. This is better than its five-year compounded annual growth rate of 3.23%.

Challenges for the period will include uncertainties in oil prices and prevailing geopolitical tensions, primarily the ongoing trade war between the United States and China.

Philstocks also remains optimistic for the property sector, which could benefit from the recent excitement on real estate investment trusts (REITs). Ayala Land, Inc. is expected to be the first company to place its property assets into a REIT this year.

Its top picks for the second half include DM Wenceslao & Associates, Inc. at a target price of P15-17 apiece, Cebu Landmasters, Inc. (target of about P7.20), and Megaworld Corp. (target of about P7.10).

The company is likewise bullish on retail stocks, particularly Puregold Price Club, Inc.

“Puregold offers promising opportunities over the medium-term given its push to open more legacy Puregold and S&R stores, in addition to the eight in the first quarter and sustained improvements in its activity and efficiency ratios,” the company said.