LOCAL BROKERAGE firm COL Financial Group, Inc. is “cautiously optimistic” that the Philippine Stock Exchange index (PSEi) would end the year at the 8,600 level, as it expects inflation to further slow down and the peso to strengthen against the US dollar.
During a media briefing in Ortigas Center on Monday, COL Financial officials said inflation is seen to have peaked last year and will continue to fall this year, which may put an end to interest rate hikes by the central bank and increase consumers’ confidence to spend.
“Although there are reasons why we should be optimistic about this year, I feel like we have to be cautiously optimistic, I feel like the upside is capped,” COL Financial Chief Equity Strategist April Lynn C. Lee-Tan said during the briefing.
On Monday, the PSEi closed flat at 8,053.92.
Ms. Lee-Tan identified several risks that may hinder the growth of the PSEi this year, the first being the “twin deficits” — the budget deficit and the current account deficit. She noted the “twin deficits” will “limit the peso’s strength and interest rate decline.”
“Our current account is actually in the deficit because of the importation of a lot of capital goods, and if the government will pursue the “Build, Build, Build” program, we will continue to see a high level of budget deficit and current account deficit to continue,” Ms. Lee-Tan said.
She also flagged an expected slowdown in investment and government spending this year, due to the delay in the passage of the 2019 national budget and the election ban. Other risks include a “worse than expected” global economic slowdown, and tighter global liquidity conditions.
“We’re just expecting the market to go back to the mean. Mean reversion lang [only]… So that’s just our expectation of the market,” Ms. Lee-Tan said.
COL Financial expects banking, consumer, cement, and airline sectors are expected to rise this year. Mixed outlook is seen for property, power and telecommunications sectors. — Denise A. Valdez