MANILA – Philippine shares are set to resume a bull run in the second half of 2019, First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said on Thursday.
It cited slower inflation, lower interest
rates, government spending, and favorable corporate earnings as market catalysts.
“With foreign investors back by early July and the willingness of local
investors to fill in the slack when the former stayed out of Philippine
equities has enabled the PSEi to approach 8,400 on July 15,” FMIC and UA&P
said in its July 2019 edition of “Market Call.”
“We find it likely that PSEi will resume bull run only in the latter half of H2 amidst the MSCI rebalancing set to happen in August.”
“The
resumption of falling inflation and of liquidity infusion by the Bangko Sentral
ng Pilipinas (BSP) with its 25-basis-point policy rate cut in mid-May and the
200-basis-point reduction in reserve requirement ratio by end-July provides the
turnaround to positive sentiment,” according to FMIC and UA&P.
“The attractiveness of PSEi going forward got a boost from the fall of headline
inflation to 2.7 percent in June, and…likely…to below 2 percent year-on-year by
August 2019, lower interest rates, and a quick recovery in national government
spending,” it said.
Government spending grew by 8.9 percent in May, a month after the April 15 enactment of the 2019 budget, FMIC and UA&P noted.
The national government also recorded a 20 percent growth in infrastructure spending of 13 months in 2017 to 2018, providing evidence that spending for the rest of 2019 is ramping up, it said.
“Corporate earnings look set to improve as well,” FMIC and UA&P said. “Corporate earnings should rebound with the strong acceleration of the economy starting second quarter.” (GMA News)
