COL Financial Inc., an online brokerage firm, expects the Philippine bull run to be very volatile as global economic outlook remains poor.
COL head of research April Lynn Tan said in a press briefing Monday the global economy was showing signs of slowing down because of policy uncertainty amid the US-China trade war and United Kingdom’s exit from the European Union (Brexit).
“Although central banks are loosening their monetary policies, it remains uncertain if they will succeed in addressing economic growth concerns,” Tan said.
Tan said Philippines in the domestic front would continue to suffer from an above average budget deficit and a current account gap.
Tan, however, expects the bull market to likely continue as factors hurting the performance last year such as inflation, interest rates, the peso and foreign fund flows had all reversed in favor of the Philippines.
She expects the Philippine Stock Exchange Index to hit 8,600 points by the end of the year.
Aside from falling inflation rate, Tan said expectations that the Bangko Sentral ng Pilipinas had more room to loosen its monetary policy given a more dovish US Fed was boosting market sentiments.
BSP Governor Benjamin Diokno earlier pledged to cut interest rates further and lower the reserve ratio for lenders to support the domestic growth.
The passage of the delayed 2019 national budget, meanwhile, is expected to result in faster domestic economic growth in the second half of the year.
Tan said stock prices remain attractive relative to their historical average.
“We currently trading at 17 times P/E (price earnings ratio) which is the low end of five-year PE band. There are still so many stocks at this stage that are trading at a discount,” Tan said.
COL Financial expects corporate earnings this year to grow 13 percent from the initial target of 11 percent, as property and banking sectors are expected to register strong growth.
“The strong sectors for this year would be property because of residential and the leasing and banks, which is expected to post a strong recovery this year on higher trading gains as well as healthy loan growth,” Tan said.
COL Financial’s top stock picks for this year include Ayala Land Inc., Megaworld Corp., and Filinvest Land Inc. in the property sector and Metropolitan Bank & Trust Co. and Security Bank in the banking index.