THE PHILIPPINE Stock Exchange index (PSEi) is projected to reach the range of 7,800 to 8,100 at the end of the year on the back of the impending distribution of vaccines against the coronavirus disease 2019 (COVID-19), according to First Metro Investment Corp. (FMIC).

During a virtual media briefing on Thursday, FMIC Research Head and First Vice-President Cristina S. Ulang said the financial services firm expects the market’s price-to-earnings ratio to be around 18x to 19x for 2021.

She said some of the factors that could boost the market include the rollout of COVID-19 vaccines, monetary policy support, and low interest rate.

“Another thing that can affect the market is the proposed Senate Bill 1357 or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which will lower income taxes for the corporate sector and boost corporate earnings 24%, and can even go higher to 29% or 30%,” Ms. Ulang said.

However, she said a number of risks could affect the local market such as a delay in vaccine distribution, another wave of COVID-19 infections, and a return to stricter quarantine measures.

“We do not know what is going to happen with the virus mutation and how the vaccine is going to be deployed,” Ms. Ulang said.

She noted that the stock index had recovered 57% since the implementation of the lockdown in March 2020 and closed the trading year at 7,139.71.

“It is still low compared to the beginning of 2020, which was 7,815.26, but the one thing that is very remarkable about this market is that there has been very little foreign participation,” Ms. Ulang said.

“This gives us some thought on whether there has been a paradigm shift that the PSEi can move higher because of local participation. This is a new thing for us,” she added.

Further, Ms. Ulang said that $2.5 billion worth of outflows happened in 2020, which means that the market is “under-owned.”

“Foreign ownership is around 23.4% for 2020. It is possible that foreigners can come in due to the need to diversify and look at opportunities in Asia,” Ms. Ulang said.

In the debt capital market, 2021 will continue to be an opportunity for people who were hesitant last year to enter the market, said FMIC Investment Banking Head and Executive Vice-President Daniel D. Camacho.

Mr. Camacho added that the Bangko Sentral ng Pilipinas had been clear in using policy tools such as rate cuts when needed.

“Investors are looking for an outlet for their funds with a sweet spot on the shorter end of the curve of up to three years in tenor. However, we are starting to see modest appetite for the five-year bucket, as long as investors are aptly compensated,” he said.

On Thursday, the PSEi closed at 7,273.15, higher by 30.3 points or 0.41% from the previous trading session. — Revin Mikhael D. Ochave

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