At 6,411.41 level, the Philippine Stock Exchange index (PSEi) has given up all gains during the year and is now down 0.60% year-to-date (YTD). For reference, the PSEi’s highest level this year was at 6,979.81 (up 8.2%).<\/p>\n\n\n\n
From a regional perspective, the Philippines is lagging behind APAC alongside Thailand and Indonesia. The common denominators among these three laggard markets are the weak local currency and net foreign outflows.<\/p>\n\n\n\n
The Peso has weakened over 5% YTD \u2013 ranked as the 2nd weakest across ASEAN currencies (with only the Thai Baht worse at -7.2% YTD). Foreign flows have reversed from being net positive during the earlier part of the year to being net negative now (-US$320mn YTD). Foreign ownership continues to be a near historic lows at below 21%.<\/p>\n\n\n\n
Out of the major sectors, the BANKS\/FINANCIALS are the only clear outperformers while select CONSUMERS and TELCOS are slightly ahead of the overall market YTD. In contrast, the PROPERTY sector is the biggest laggard during the same period.<\/p>\n\n\n\n
Specifically, ICT, MBT, MONDE, CNVRG and BPI are the top advancers YTD while ALI, AEV, JGS, SMPH, JFC and URC are among the top losers. Valuation looks attractive anew with the market trading at around 11x 2024 earnings \u2013 2 std dev
from the mean.<\/p>\n\n\n\n
Our View:<\/strong> We continue to hold on to our base case PSEi target of 7,300 which translates to 12.6x P\/E (still 1 std dev vs. mean). Our index objective is backed by EPS growth forecast of 10.3% year-on-year for 2024 and 2025. <\/p>\n\n\n\n Our projections assume GDP growth of 5.7% this year and also baked into our forecast is a 50bps (0.50%) rate cut before end-2024.<\/p>\n\n\n\n Positive catalysts: (1) inflation expectations to be well anchored and to start easing during the 2nd half of 2024; (2) monetary policy easing to start during the 4th quarter 2024; (3) positive reversal in terms of foreign flows; and (4) positive surprise from higher infra spending.<\/p>\n\n\n\n We reaffirm our view from the start of the year that downside looks limited and 2024 is a year of positioning.<\/p>\n\n\n\n Our conviction stock bets: SM, MBT, URC, JFC, ALI, ICT, AP and MWC.<\/p>\n\n\n\n