NUMBERS and valuations in the Philippine Stock Exchange index (PSEi) reflect a positive outlook for 2025, amid concerns in macroeconomics, geopolitical situations and the new United States president, stockbrokerage firm Luna Securities Inc. said in a report.
Luna Securities research analyst and strategist Annika Angeles said that PSEi could trade with a low of 7,030 and a high of 8,080 next year.
“At the current level of 6,500, Luna APSIS’ quantitative risk-reward suggests the market can still climb the wall of worries,” she pointed out, noting there is a potential peak of 9,399 in the most optimistic scenario.
Angeles described the last three months of 2024 as “extremely volatile” due to rate movements, inflation and the US presidential elections.
“Despite headlines of further rate cuts, the market reversed with the 10-year bond rising from 3.6 percent to 4.6 percent [compared to the US Federal Reserve rate of 4 percent] and USD index rising from 101 to 108 against other major currencies,” she explained.
In the historical context, the local stock market has shown growth in five out of 10 years during periods of stability, with a mean growth of 5.77 percent, Angeles said.
“[An] established historical trend serves as the basis of our sensitivity analysis. We believe the market-normalized phase is still relevant and has guided us to navigate the difficult last two years with consistent outperformance for our managed and advisory clients,” she added.
The relationship between PSEi yields and fixed-income yields with a gap of 3 percent or higher presents a buying opportunity, while a gap of 0.5 percent to 2.5 percent suggests a selling stance, Angeles said.
In October, Angeles said the gap was 0.85 percent, which suggests caution or sell, while in the past month, with PSEi falling and rate cuts presenting a widening gap, it suggested a buying opportunity space.
“Given current sensitivity analysis, which includes three scenarios: 0 percent growth, 2.5 percent growth and 5 percent growth — and the recent 25-basis-point cut, the baseline scenario suggests PSEi valuation will trade between a floor of 7,030 and 8,080 ceiling,” she said.
The floor and ceiling index suggests an 8.15-percent and a 24-percent upside, respectively.
“The further rate cuts and earnings improvement, the upside potential grows,” Angeles concluded.
Lower capital raising
Meanwhile, the PSE recorded lower capital raising this year amounted to P82.37 billion compared to P140.95 billion in 2023, due to “internal and external economic and geopolitical headwinds weighing on the market for most of the year, which in turn prompted initial public offerings (IPOs) listing applicants to defer their public offering,” PSE President and CEO Ramon Monzon said.
The local stock exchange targeted to double last year’s IPO to six could list only three.
The local bourse saw the maiden listing of OceanaGold (Philippines) Inc. (OGP), Citicore Renewable Energy Corp. (CREC) and NexGen Energy Corp.
However, according to Deloitte, the three listings have raised over $203 million (P11.76 billion) at a market capitalization of $972 million, compared to last year’s $81 million (P4.7 billion) at a capitalization of $287 million.
OGP and CREC were among the top IPOs in Southeast Asia in terms of amount of capital raised. OGP raised $104 million (P6.08 billion) in May, while CREC raised $90 million (P5.3 billion), placing them in the fourth- and seventh-largest listing in the region.
The benchmark PSEi marked the first time since 2019 to end year-on-year higher, which on Friday closed at 6,528.79 points, 1.2 percent higher or 78.75 points up compared to last year’s 6,450.04.
The PSE MidCap index, which records the performance of midsized companies, increased by 29.1 percent year on year, while the PSE DivY index, that focuses on high-yielding dividend companies, grew by 22.4 percent year on year.
Daily average value turnover reached P6.10 billion, while domestic capitalization at year-end rose by 11.2 percent to P14.57 trillion from last year’s P13.10 trillion.
The market registered P23.18 billion worth of net foreign selling against the P53.65 billion in the previous year.
“One of the investment considerations at this time is the direction of economic policies of the new US administration,” Monzon explained. “An outcome favorable to the Philippines may help spur foreign buying and create the market condition listing applicants are waiting for.”
The services index, which spiked by 29.7 percent, was hailed as the best performer in 2024.
“PSE remains committed to initiatives that enhance stock market liquidity, including the launch of Global Philippine Depositary Receipts and the acquisition of Philippine Dealing System Holdings Corp.,” Monzon said.
“This acquisition aims to create operational synergies by establishing a unified marketplace for fixed income and equity products, and a single platform for capital raising, among others.”
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