BPI Securities Corp., the stock brokerage arm of Bank of the Philippine Islands (BPI), said the Philippine economy remains strong despite rising tensions in the Middle East.
The brokerage said the steady inflation and better supply conditions are helping investor sentiment, mitigating risks from the Middle East.
“Tensions between Israel and Iran undoubtedly pose risks to the global economy,” said Mark Race, president and chief executive of BPI Securities.
“As a major oil importer, the Philippines is exposed to price shocks. However, we take a measured view—year-to-date, the key inflation drivers for the early second quarter reflect moderation, particularly in food and utility costs, and easing transport prices,” said Race.
Race said the improved rice supply is helping control food inflation. “Year-on-year rice prices are down by more than 11 percent, and that has a meaningful impact on overall inflation expectations for the rest of the year,” he said.
BPI Securities also said the Philippine Stock Exchange index (PSEi) remains technically supported despite external pressure.
“We continue to trade above the 6,300 level, with 6,500 acting as immediate resistance. Over the next two weeks, we expect the PSEi to remain within this band,” Race said.
“However, our longer-term outlook is constructive—we maintain our year-end target of over 7,000, underpinned by projected core earnings growth of 8 percent,” he said.
Despite net foreign selling reaching P35 billion to P36 billion year-to-date, Race remains optimistic as the Philippine economy is largely driven by domestic consumption.
“Foreign holdings in Philippine stocks have declined in recent years, which has actually helped reduce the scale of sell-offs during periods of volatility,” he said.
“But more importantly, the Philippines is a consumption-driven economy with strong fundamentals. Combined with the possibility of lower interest rates, this remains a compelling proposition for select foreign funds,” he said.
BPI Securities said that unless there is a major escalation in the Middle East, the local market would remain supported by macroeconomic stability and attractive valuations.
