Strong US alliance seen boosting PH stocks to 8,600 in 2025

Philippine Stock Exchange, Bonifacio Global City, Taguig City, Dec 29, 2022. INQUIRER PHOTO / NINO JESUS ORBETA

The Philippines’ strong alliance with the United States could protect it from the effects of another Donald Trump presidency, potentially helping the local stock market reach 8,600 by the end of 2025.

Strong US alliance seen boosting PH stocks to 8,600 in 2025

According to a recent report by First Metro Securities Brokerage Corp. and DBS Bank of Singapore, the Philippine Stock Exchange Index (PSEi) is expected to close between 6,600 and 8,600 next year.

For the market to reach the bull case of 8,600, First Metro-DBS said the Philippine economy needed to grow by more than 6.5 percent, along with lower interest rates and “stable inflation.”

In the third quarter, the country grew by 5.2 percent, lower than the 6-percent growth recorded in the same period last year as unpleasant weather disrupted various sectors.

READ: Understanding the Philippine stock market

Despite the slowdown, the DBS economics unit revised its gross domestic product growth forecast for the Philippines next year to 5.8 percent from 5.4 percent previously.

“The growth outlook for 2025 is becoming clearer … We see potential for economic data to surprise on the upside, possibly warranting further upgrades,” First Metro-DBS said.

Their stock index projection likewise entails a 30-percent rally from the PSEi’s current level of 6,600. So far, the bourse has slipped by more than 14 percent from its recent peak as investors anticipated that Trump’s policies would hurt equities across the globe.

But while the local market may continue charting a volatile path next year amid another Trump presidency riddled with import tariff hikes, the Philippines is seen “relatively less vulnerable” to the Republican president-elect’s policies.

“On the one hand, the Philippines relies heavily on internal economic drivers, such as domestic consumption, which we believe will further strengthen amid a recovering macroeconomic environment,” First Metro-DBS said in the report.

11% earnings growth

This considers consumption recovery next year that could result in 11-percent earnings growth for Philippine corporations.

“Disinflation and our outlook for a consumption recovery should enable companies to achieve healthy top-line growth,” they said.

The outlook likewise assumes that valuations will be 11.8 times prospective earnings, meaning stocks will sell for a low price when compared with the money they could make for investors. This is typically attractive for traders, as they can buy cheap stocks and later pocket gains when the price increases.

However, First Metro-DBS stressed that the 6,600 bear case was still possible as global uncertainties remained high.

“While there is ample upside to our base case target at the current level, the path forward is expected to be volatile,” they said. “This stems from a tight tug-of-war between improving fundamentals and uncertainties surrounding possible Trump 2.0 policies, which underpin volatility in the next 12 months.”

Still, First Metro-DBS said the market may have already priced in this volatility following the recent round of selloffs, leaving room for growth in 2025. INQ