The new forecast, slashed from the previous 7,600 base case, comes with a wide trading range of 5,800 (bear case) to 8,000 (bull case), reflecting deep uncertainty around tariff wars, disrupted supply chains, and volatile global interest rates.
It also implies a 5.7 percent growth for the PSEi over its 2024 close.
The outlook was based on an April 23 report by the FMS Research team led by Mark Angeles and Estella Dhel Villamiel.
While the base target implies a modest 9.5 percent upside from current levels, stock picking will be key to beating the market.
“We are of the view that the market has heavily discounted the positives on the Philippine equities market. Having said, we advocate continued increased exposure to Philippine equities, especially on pullbacks,” FMS Research said in the report.
Why buy Philippine stocks?
FMS provides the following justifications:
• Trump 2.0 risks are limited thanks to strong domestic consumption and upcoming midterm election spending.
• Earnings outlook remains solid, with most major companies earning mainly from Philippine operations.
• Foreign fund outflows are tapering, with much of the de-risking already behind the market.
• Positive catalysts are building, including FATF Grey List exit, possible stock tax cuts, and potential credit rating upgrades.
• Market support remains strong, with room for more trade deals and BSP policy moves to cushion growth risks.
Rethinking stock picks
FMS Research recommends a barbell strategy focused on large-cap cyclical stocks tied to the country’s growth momentum, alongside high-dividend stocks that can outperform during an economic slowdown by offering stable income and benefiting from yield repricing.
“At the start of the year, our preferred picks focused on index glamour names with cyclical earnings drivers,” the report showed.
“However, recent developments have created a more complex investment environment. We now expect the local equities market to oscillate between pricing in the Philippines’ constructive macroeconomic fundamentals and discounting uncertainties surrounding Trump 2.0 policies,” it added.
Stock ideas
First Metro’s large and cyclical stock picks are Ayala Land Inc. (P35.80), Bank of the Philippine Islands (P152.00), BDO Unibank (P192.00), Jollibee Foods Corporation (P330.00), SM Investments Corp (P1,150.00), and SM Prime Holdings (P32.00).
For dividend plays, they recommend AREIT, Inc. (P42.50), MREIT, Inc. (P15.10), PLDT Inc. (P1,600.00), Puregold Price Club Inc. (P36.00), RL Commercial REIT, Inc. (P6.80), and Wilcon Depot Inc. (P9.00).
All are rated “Buy” under their barbell strategy to hedge global risks.
3 scenarios
FMS Research sees the index dropping to 5,800 if domestic spending slows sharply, business sentiment weakens, and Trump 2.0 policies cause a global slowdown, limiting the BSP’s ability to cut rates.
The base case puts the index at 6,900, helped by steady consumer demand, midterm election spending, milder Trump 2.0 effects, and at least 75 basis points of BSP rate cuts to support growth.
In the bull case, the index could climb to 8,000 if the Philippine economy stays strong, elections and lower interest rates push growth above 6 percent, and corporate earnings get a boost from better trade deals and AI-driven gains.
