BPI Securities, the stock brokerage arm of Bank of the Philippine Islands (BPI), anticipates a favorable outlook for the country for 2020, setting a PSEi index target of 9,000.
Haj Narvaez, President of BPI Securities, expects 2020 earnings growth for the PSEi Index to match this year’s figure of 12%. Next year’s growth in earnings is likely to be fueled by the banks, property, and the resurgent consumer sector.
“We are currently trading at around 16 times forward earnings, near the market’s 10-year average. Amidst strong earnings and macro growth, the backdrop for 2020 appears more attractive than the present year and we think the PSEi can trade around 18 times, translating to an index target of 9,000 for 2020,” said Narvaez.
He added that the Philippines may look especially attractive in case the trade war worsens given the country’s minimal reliance on exports.
Furthermore, Narvaez reckons potential rate cuts from both the United States’ Federal Reserve Bank and the Bangko Sentral ng Pilipinas (BSP) will support riskier assets like stocks and provide a cushion against slowing growth globally.
“The country’s macroeconomic picture for 2020 looks promising. We believe that the uptick in government spending and continued rise in consumption will drive the country’s GDP growth, with Philippine Stock Exchange index (PSEi) earnings growth expected to replicate this year’s figure of around 12 percent. It is also worth noting that lower rates tend to be supportive of equities,” said Narvaez.
Despite the positive prospects for next year, Narvaez said that volatility is still to be expected due to the US-China trade war. To counter adverse consequences, investors are advised to focus on stocks that offer growth and value.
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