Share prices are expected to move sideways at the start of the trading week of 2019, but the outlook for the coming year hinges on easing inflation and interest rates.
BDO Nomura said in a report that the slumping crude oil prices should result in a host of benefits, including lower import bill, reduced current account deficit, lessened pressure on the Philippine peso, dampened inflation and a possible moderation in Bangko Sentral’s policy action which could also impact Philippine stocks.
“Declining oil prices should help dampen headline inflation, which remained elevated into October. Beyond a possible moderation in the BSP’s monetary policy stance, slower inflation should reduce margin pressure on inflation-sensitive stocks. We see inflation as less of a risk for equity investors versus this time last year, and we turn more positive on consumer stocks,” BDO Nomura said.
The bank said while foreign funds were flowing back to developed markets, the risk of a Philippine exchange rate crisis was low and that the country might actually benefit from escalating US-China trade tensions.
BDO Nomura expects the Philippine Stock Exchange index to hit 8,300 in 2019, although this was still below the all-time high of 9,059 registered in January 2018.
“We believe a significant market re-rating remains dependent on major domestic catalysts such as progress on tax reform and a successful infrastructure rollout,” BDO Nomura said.
The PSEi, the 30-company bellwether, closed at 7,466.02 on 2018’s last trading day, down 12.8 percent year-on-year.
All sectoral indices also finished lower, led by mining and oil index which was down the most at 28.7 percent in 2018. Total value turnover for the year was P1.74 trillion, with an average trading turnover of P7.15 billion per day.
Total market capitalization dropped 8.17 percent in 2018 to P16.15 trillion from P17.58 trillion in 2017.
“It is human nature to want a perfect ending to a story. Looking at the stock market’s performance this 2018, it may not be as good as what most hoped for but it is also not as bad as some feared,” PSE chairman Jose Pardo said.
