Philstocks lowers corporate growth targets

MANILA, Philippines — Philstocks Financial is revising downwards its year-end forecasts for the country’s benchmark index, as well as growth of corporate earnings.

In its midyear 2022 review released yesterday, Philstocks said it expects the Philippine Stock Exchange index (PSEi) to finish the year at anywhere between 7,080 and 7,365, down from the previous target of between 7,600 and 8,200.

It likewise revised downward its corporate earnings growth projection from 25 to 35 percent to 25 to 30 percent, with the upside being dashed by the country’s elevated inflation.

“Assuming economic growth reaches the upper end of our forecast, and inflation settles at the lower end of our expectations, we project corporate earnings growth at 30 percent,” Philstocks research manager Japhet Tantiangco said.

“Meanwhile, if economic expansion settles at the lower end of our forecast while inflation reaches the upper end of our projections, corporate earnings growth is seen at 25 percent,” he said.

Philstocks is keeping its earlier growth forecast for 2022 at 6.8 percent to 7.2 percent.

In the first half, Tantiangco said PSEi corporate earnings grew by 30 percent year-on-year.

Moving forward, he said such growth momentum could be sustained for the remainder of the year given the strong aggregate demand expected in the second half as the economy continues to recover from the pandemic.

“However, our soaring inflation, which is seen to dampen household consumption, poses downside risks to our corporate revenues and consequently profits,” Tantiangco said.

“Consumers and businesses may also start to feel the pinch of the rising interest rates, which in turn could somehow weigh on demand,” he said.

Philstocks said while corporate performance is still seen as the main fundamental driver of the market this year, investors are expected to take cues from other significant factors.

Headlining these are the monetary policy outlooks of the Federal Reserve and the Bangko Sentral ng Pilipinas, it said.

“A continuation of the Fed’s aggressively hawkish policy steps is seen as a downside risk since it may cause foreign fund outflows and a further depreciation of the peso, both of which are negative for the local bourse,” Tantiangco said.

“Meanwhile, a further tightening of the Bangko Sentral ng Pilipinas is expected to weigh on the economy’s outlook. This in turn may also dampen sentiment,” he said.