PSEI could top 6,600 this year

THE benchmark Philippine Stock Market index (PSEi) could end 2026 topping 6,600 despite a bearish year so far, brokerage firm Philstocks Financial Inc. said, as local equities could benefit from relatively cheap valuations once macroeconomic conditions improve. In its September 2026 outlook, Philstocks projected the PSEi to finish the year within a range of 6,000 to 6,628, compared with its 5,956.33 close as of Aug. 28. It said the market's valuation remained attractive despite the challenging economic backdrop, with the PSEi's price-to-earnings ratio at 10.6 times as of Aug. 28, below its 2021-2025 average of 14.4 times and the regional average of 16.2 times. 'Given challenging macroeconomic conditions, we still expect good revenue generation and cost management efforts to deliver a 3 percent bottom-line growth,' Philstocks said. It added that earnings growth could reach 7 percent should macroeconomic conditions improve. The PSEi fell 1.6 percent in the first eight months of the year and was down 3.78 percent year on year as of Aug. 28, making it the second-worst performer among Southeast and East Asian markets tracked by Philstocks. Market sentiment was weighed down by the country's high dependence on oil imports, limited exposure to the global artificial intelligence-driven rally and concerns surrounding flood control projects, the research firm said. Foreign investor trading reflected the weak sentiment, with net foreign selling reaching P25.09 billion in the first eight months, or an average of P154.88 million per trading day. 'Chart-wise, the local market has turned bearish after peaking at 6,488.35 last July 21,' Philstocks said, noting that the index had fallen below its 50-day and 200-day exponential moving averages and momentarily breached the critical 6,000 support level. For the near term, the brokerage expects the index to consolidate between 6,000 and 6,150. A break above 6,150 could help push the index toward 6,400, while renewed negative catalysts could drag it below 6,000 toward the 5,800-support level. Using a statistical model that considers the PSEi, peso-dollar exchange rate, S&P 500, Volatility Index and US Dollar Index, Philstocks sees the PSEi ending the year between 6,241 and 6,487. The research firm identified the VIX, a gauge of global risk sentiment, as the most critical variable in its model. 'A souring of global risk sentiment, reflected by an increase in the VIX, may result in a chain reaction,' Philstocks said, noting that this could lead to weaker US equities, a stronger dollar and a weaker peso, all of which would weigh on the PSEi. Meanwhile, Philstocks expects the Philippine economy to grow between 2.1 percent and 3.1 percent this year, following the subdued 2.6-percent growth in the first half. It noted that first-half growth was the slowest for a non-pandemic period since 2009, with high inflation and weaker consumer confidence having weighed on household consumption while cautious public infrastructure spending amid corruption concerns curbed investments. Inflation is also expected to remain elevated, with Philstocks forecasting full-year inflation at 5.6 percent to 5.7 percent, well above the government's 2- to 4-percent target. It expects inflation in the remaining months of the year to average between 6.5 percent and 6.9 percent, citing risks from El Niño, a weak peso, elevated electricity rates, high global oil prices and inflation expectations. Philstocks expects the Bangko Sentral ng Pilipinas to keep its benchmark interest rate at 5.0 percent for the rest of the year, balancing persistent inflationary pressures against slowing economic growth. It also expects the peso to trade between P61.75 and P62.75 per dollar for the remainder of 2026, citing elevated oil prices, higher agricultural imports and continued balance of payments pressures. Given the market's bearish bias and economic risks, Philstocks recommended that investors maintain a defensive stance, favoring consumer-oriented and utility companies. Among its preferred consumer stocks are Puregold Price Club Inc. and Universal Robina Corp., while Aboitiz Power Corp. and Manila Electric Co. were its utility picks. It also identified telecommunications companies as potential long-term opportunities, citing their depressed share prices and continued demand for data services amid digitalization and artificial intelligence adoption. Its telecommunications picks included Converge ICT Solutions Inc., Globe Telecom Inc., and PLDT Inc. For banks, Philstocks picked BDO Unibank Inc., Bank of the Philippine Islands, and Metropolitan Bank & Trust Co., while recommending caution but trading opportunities in mining stocks after the mining and oil index gained 33.27 percent in the first eight months.