AB Capital: Bull run starts, 8,500 next goal
Based on historical precedence, this market has a long way to go as it has just started a new bull cycle
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Daily TribuneBased on historical precedence, this market has a long way to go as it has just started a new bull cycle
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The bourse index is expected to hit 8,500, a level that has not been seen for some time. Stock brokerage firm AB Capital said the stock market is officially on a bull rally as it rose over 20 percent from its June 2024 low and traded above the 7,400 mark.
“We assert that the rising optimism in the market is firmly grounded. Positive macro backdrop — easing inflation, lower rates, stronger peso, and positive earnings revision — plus favorable foreign fund inflows should help sustain the market’s momentum,” the stock investments house stated.
The Philippines now leads the Association of Southeast Asian Nations markets with 15.2 per gain year-to-date (YTD). It has risen by over 20 percent from its June low and our 12-month index target of 8,500 translates to around 14 percent additional gain from its current level.
Based on historical precedence, this market has a long way to go as it has just started a new bull cycle, AB Capital indicated.
Cycle of prosperity
History tells us that previous bear cycles or low growth/recessionary years like the 1997-98 Asian Financial Crisis (AFC) and 2008-09 Global Financial Crisis (GFC) have preceded a decade of strong growth — years wherein the Philippine equities market went through bull cycles typically lasting around two to four years and resulting in average cumulative gains of between 100 percent to 250 percent.
The 1993 to 1997 bull market lasted about four years, driven by economic reforms, foreign investments, and regional growth; the market rose over 200 percent before the AFC came in 1997.
In 2003 to 2007, another significant bull market spanned approximately four years, buoyed by strong economic growth and a global market boom; the PCOMP gained around 250 percent before the global financial crisis hit in 2008.
Post-2008, the Philippine market rallied for about 4 years, recovering strongly as global markets stabilized; the index surged more than 250 percent during this period.
A shorter bull market of around two years, largely driven by domestic consumption, infrastructure development, and the “Build, Build, Build” program of the govt during that period; the market saw relatively steady growth during this period (less than 30 percent cumulative gains).
Key drivers of the bull season include stronger EPS (earnings per share) and GDP (gross domestic product) growth — we forecast EPS to grow by 12 percent for both 2024/2025 and we upgraded our GDP growth projection to 6 percent year-on-year (y-y) for 2024 to 2025.
Supportive monetary policy and forex, we expect 25 basis points (bps) rate cut before end-24 and by 100 bps in 2025E as we expect inflation to average 3.1 percent in 2024 and 2.6 percent in 2025 and the peso is expected to settle at P55 per $1 and P54 per $1; and pick-up in govt spending and investment specifically in infrastructure. In addition, overall spending could also get an extra boost from the May 2025 mid-term elections while the passage of the CREATE MORE bill should aid in stimulating economic activity via lower corporate tax rates.
Bellwether rises
The local bourse on Thursday climbed by 22.49 points, or 0.31 percent, to close at 7,402.81.
Most sectors gained, with Mining and Oil leading the green territory, rising by 2.17 percent, followed by Services and Financials, up by 1.35 percent and 0.95 percent, respectively.
Industrial was the biggest loser, down by 0.70 percent, followed by Property shedding by 0.12 percent.
Nickel Asia Corporation was the top index gainer, jumping 5.19 percent to P3.85 while ACEN Corporation was the main laggard, dropping by 2.22 percent to P5.29.
“Philippine shares still managed to eke out gains despite rising Middle East tensions weighing on investor sentiment, while the International Longshoremen’s Association strike on the East and Gulf coasts could cost the economy hundreds of millions of dollars,” Regina Capital Development Corp. head of sales Luis Limlingan said in a Viber message.
Meanwhile, Philstocks Financial Inc. senior research analyst Japhet Tantiangco linked the positive performance to investors cheering on the September S&P Global Philippines Manufacturing PMI, which came in at 53.7. He said this reflects a quicker expansion of the manufacturing sector compared to the preceding month.
The net market value turnover was to P4.056 billion, with losers outweighing winners at 114 to 91, while 56 names remain unchanged.
International Container Terminal Services Inc. was the most actively traded stock at P449,997,994, up by 2.92 percent, followed by Globe Telecom Inc., at P435,954,820.00, up by 1.25 percent.
The peso closed at P56.178 to a dollar from 56.145 on Tuesday.
