Fiscal policy easing to lift main stock index in 2020, says FMIC

First Metro FMIC logo 071618 - Fiscal policy easing to lift main stock index in 2020, says FMIC

By Denise A. Valdez, Reporter

FIRST METRO Investment Corp. (FMIC) is projecting the main index of the Philippine Stock Exchange (PSE) to reach up to 8,600-8,900 in 2020, driven by the easing of fiscal policies and regulatory reforms this year.

In a briefing in Taguig City yesterday, the investment banking arm of the Metrobank group announced its projections for 2020, where it said the equities market is in the best position to grow this year. Aside from the PSEi forecast, FMIC also said the price-earnings ratio of companies in 2020 may hover around 16.8x-17.4x.

“If last year was a year of consolidation, that means the market can either go up or down (this year). But we are confident that there are a lot of arguments for the market to rise,” FMIC Vice-President Cristina S. Ulang said.

Among the catalysts FMIC enumerated are the growth momentum of corporate earnings, which it expects will rise 10% this year, the 1.7% growth differential between emerging markets and developed markets, the low base of foreign ownership of non-US stocks and the wider space for monetary policy easing in emerging markets versus developed markets.

“I believe the big swinger in as far as the PSEi rise above 8,000 (is concerned) would be policy direction, which is unfolding very nicely, coupled with policy execution,” Ms. Ulang said.

She noted the projected 6.2-6.6% gross domestic product (GDP) of the Philippines in 2020 makes it stand out from other countries that are also given a BBB+ debt rating by S&P Global Ratings.

“The Philippines continue to be one of the best in terms of GDP growth… If you look at Mexico, same rating, (GDP is around) 1%. If you look at Thailand, (it’s below 3%). We are the only BBB+ rated which is going to do 6% this year. It’s a compelling case for foreigners to revisit the Philippines,” Ms. Ulang said.

She added the Philippines has a big fiscal policy space to counter global headwinds such as the US-Iran conflict, Brexit, Hong Kong protests and Taiwan elections, driven by ongoing tax reforms which is driving government revenues up and a well-maintained debt-to-GDP ratio of below 38%.

“We can very well handle both the debt burden and the expenditure imperative. Whatever happens globally, you have your monetary policy. The central bank has room to cut rates,” Ms. Ulang said.

FMIC Executive Vice-President Daniel D. Camacho also said the equities market is seen to gain stronger momentum in 2020 on the back of solid macroeconomic fundamentals and a few regulatory developments: the release of rules for real estate investment trusts (REITs), the approval of short-selling transactions and the increasing of the minimum public float to 25%, which will require new offerings from one-fifth of the market.

Other factors are new issuances as the bourse operator hopes to have about six initial public offerings this year.

Aside from the equities market, FMIC also projects the debt capital market to sustain its growth in 2019 when it jumped 70% to P630 billion.

“We’re optimistic that 2020 will have an active debt capital markets on the back of continued low interest rates; solid macroeconomic fundamentals, which we expect shall be driven by higher consumer spending, muted inflation and lower unemployment; and refinancing opportunities amounting to P230 billion; as well as outstanding shelf registration from corporates,” Mr. Camacho said.

The PSEi closed Tuesday’s session up 16.48 points or 0.21% to 7,793.25.

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