The Philippine stock market has the weakest outlook among five regional stock indices in 2024, underscoring the impact of inflation and higher interest rates on corporate earnings in the consumer-driven Southeast Asian nation, DBS Bank and First Metro Securities Research said in a report.
The Philippine Stock Exchange Index was the only barometer assigned a “negative” outlook, with a year-end target of 6,700, implying a 4.9 percent upside from its current level.
“We anticipate it will take another one to two quarters before the [gross domestic product] slowdown comes to an end,” wrote Estella Dhel Villamiel, head of research for institutional clients at First Metro Securities.
The slowdown will weigh on domestic earnings per share, which will grow 5 percent this year before recovering to 7 percent growth in 2025.
“The market is in correction mode, as the growth narrative has changed in line with our view of an economic and earnings slowdown,” Villamiel said.
Regional laggard
The Philippines trails behind close neighbors although the regional outlook is also a mixed bag.
Stock market indices in Thailand (SET) and Indonesia (JCI) were rated “neutral” in the report while Singapore (STI) and Hong Kong (HSI) were rated “positive”.
“We believe most regional market indices will stay rangebound, for now, until any upcoming US inflation data breaks the gridlock in the current market expectations of one to two rate cuts this year,” the report showed.
Philippine stock picks
Villamiel advised investors to focus on stocks with “visible earnings growth” despite the slowdown.
“We prefer counters with secular demand drivers, that can maintain margins, and have a strong balance sheet,” she said.
The four top picks are Robinsons Land Corp. with a target price (TP) of P22.50, Universal Robina Corp. with a TP of P145, Jollibee Foods Corp. with a TP of P300 and Converge ICT Solutions Inc. with a TP of P13.3 per share.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
