The Philippine Stock Exchange index (PSEi) will likely recover to 8,600 by yearend but investors must brace for choppy trading in the coming months, according to stock market experts from leading online brokerage COL Financial.

COL trimmed its yearend PSEi outlook by 7.5 percent from the previous yearend forecast of 9,300 and also tempered its projected earnings per share this year by 4.6 percent. COL expects corporate earnings this year to grow by an average of 12 percent, lower than its outlook early in the year, but better than the actual growth of 6 percent posted last year.

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In a press briefing Monday, COL head of research April Lee-Tan said most of the negative news may have been priced in by now. However, she said the PSEi may not return to previous highs yet as the market was still awaiting fresh catalysts, such as the peaking of local inflation, corporate earnings outperformance, a pause in US Federal Reserve’s interest rate increases and resilient corporate earnings outside of US and China amid trade tensions between these two.

She said there were indications the PSEi may have reached bottom at 6,900, giving investors the opportunity to start a slow accumulation of a diversified portfolio of stocks for a long-term investing horizon. Investors must focus on blue chips trading at attractive valuations, she said.

At its yearend outlook of 8,600, COL expects the market to pay 19.8 times prospective earnings.

Lee-Tan said economic growth would remain robust. In this environment, COL favors the property and financial property sectors as well as gaming stocks.

Compared to the start of the year, Lee-Tan said COL was now more bullish on the cement and telecommunication sectors. For cement, she cited strong demand and stable prices while for telco companies, she noted profits were on an uptrend as data revenues accounted for a significant share of revenues.

COL’s stock picks in the property counter are Ayala Land and Megaworld Corp. while its top bet in gaming is Bloomberry Resorts.

For the consumer sector, it’s top pick is D&L Industries while Metrobank and Security Bank are its favored stocks in the financial counter.

Other top picks are Semirara Mining & Power (for power), Ayala Corp. (for conglomerates), Globe Telecom (for telco) and Eagle Cement (for cement). —DORIS DUMLAO-ABADILLA

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