BROKERAGE firm COL Financial Group Inc. is cutting its outlook on the benchmark Philippine Stock Exchange index (PSEi), saying it may not reach 8,000 points by the end of the year due to external headwinds such as China’s market fall and the threat of US Federal Reserve’s (the Fed) decision to increase rates.
Juan Barredo, COL head of technical research, said the main index may only reach as much as 7,950 by year-end.
“Some headwinds contributed to the index slide, such as shift sideways of the US market, the heavy drop from the Shanghai index and the rise in the US dollar,” Barredo said during the brokerage firm’s mid-year briefing on Monday.
The headwinds also affected the peso to about P45.61. Barredo said it may sink further to P46 per $1 in the coming days.
The main index reached as high as 8,136 points during the early part of the year, but it sank back to 7,272 before slowly increasing.
Barredo said a large consolidation may take shape for the rest of the year, with the main index tracking its similar stride in 2011.
“Take a more defensive approach in buying by waiting for reactions to support rather than buying along extensions into upswings. We then drive the need to be a little more selective in stock picking by focusing on stronger or more resilient trend tides,” he said.
April Lynn Tan, the company’s vice president and head of research, said foreign funds are already flowing out of the country’s such as Thailand, Indonesia and the Philippines to northern Asia.
“While the attractiveness of north Asia markets and the possibility of a Greek default are no longer concerns, the near-term outlook for the stock market remains cautious,” Tan said.
The earnings outlook for listed companies deteriorated as the 2015 estimated earnings per share growth for the PSEi has dropped to 4 percent from 15 percent, she said.
“This prompted us to reduce our end 2015 PSEi target to 7,950 from 8,300. External threats also remain such as the continuous sell-off of Thailand and Indonesian stock markets, which are considered to be the Philippines’s regional peers, and the upcoming Fed rate hike in the US,” she said.
The PSEi closed 23.26 points higher on Monday to 7,573.26.