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Looking at how the market has been performing recently, it looks like it may close and end the year in the green.
This may not mean much in terms of how our investment holdings may have actually grown, considering how little the market has gained from where it started this year. But come to think of it, it could have been worse.
We are still not completely out of the woods from the problems created by the COVID-19 pandemic, and yet we are again confronted with more challenging threats. These threats, which are turning more and more geopolitical in nature, caused negative impact on general productivity, manufacturing and distribution costs, standard of living, international trade and supply chains, to name a few. As we have seen, these threats could just as easily pull back the economy into the brink of high inflation and negative economic growth. But by some stroke of luck, the country’s fundamentals are strangely holding.
In my recent breakfast meeting with friends from the steel industry, I heard some interesting encomiums as to how the economy – and the world over – is having this kind of luck.
As they explained, the current economic benefits we are enjoying at the moment are, by and large, the result of the various monetary measures, fiscal policies, and socio-medical programs devised by governments across the globe in the last five years.
However, there is one aspect that was neglected or not properly addressed. The various economic packages and financial programs devised to step up production and individual productivity to ameliorate living standards fell short in fostering a strong middle class. They “even widened the gap between the rich and the poor,” which is a serious threat to achieving true economic growth.
So, whatever economic benefits we are enjoying at the moment remain short of the fundamentals important to true development and sustainability. It’s enough to say, though, that our state of luck is holding.
Divining the market
In line with this, this is how stockbroker Rene de los Reyes and his firm, Abacus Capital & Investment Corporation, see how their highly prized stock selections will fare by the end of the year:
They expect that several stocks from at least six sectors of the market will deliver some good results. They are also anticipating some price gains from as high as 66.01% to as low as 9.10%.
Of their top 10 stock picks, three will come from the consumer sector, two from holding firms and transport services, and one each from the leisure and gaming, property, and power and infrastructure sectors.
Needless to say, the breakdown of their investments is not necessarily determined according to the percentage of gain they anticipate from the price of their stock picks. It’s rather decided on the basis of the individual stock’s total volume and value turnover performance record.
For instance, the biggest chunk of their investment could have been assigned to SM, GTCAP, and ALI based on or their trading depth and width in the market. An equally significant slice of the fund may have been assigned to BLOOM, ICT, MONDE, and CEBP for the same reason. And the rest of the fund is distributed to MWC, DNL, and SSI for the obvious fact that they don’t enjoy as much volume and value turnover in the market.
Some optimism in 2024
The market’s momentum should continue until the end of the year.
My usual market sources and text partners, Jofer Gaite, president and chief trader of Westlink Global Equities, Inc., and Joel de la Peña, market strategist and chief trader of H.E. Bennett Securities, Inc., equally share the same view. Furthermore, they also agree that the run-up will continue, at least, up to the first half of 2024.
One reason behind this view is that the Bangko Sentral ng Pilipinas may start to cut interest rates within the first half of the year, contrary to general speculations that this will happen only by the 3rd or 4th quarter of 2024.
According to De los Reyes, this is an opportunity that should prod us to be aggressive in accumulating for next year most of the stock favorites, as well as those stocks that have underperformed this year but continue to maintain good intrinsic values.
Another optimistic factor that may drive the market up is the oil production output status of the US. Today, the US is an oil exporter. It is producing more oil on existing drilling facilities. Their prospecting activities from shale sources may have not grown, but present advances in technology have enabled the US to extract and produce more oil by 50%.
In the past, US oil production has proven to temper the adverse impact of production cuts made by countries in the Middle East to raise the price of oil. This new development may stem unexpected oil price hikes that leads to higher headline inflation.
However, worldwide forecasts point to lower economic growth for 2024. The impact of the continuing geopolitical tensions and policy-tightening measures that have been applied later this year may take their bite in the near and medium term.
The threat from a record-breaking warm year next year due to the El Niño weather may also serve as obstacle to better economic growth in 2024.
Together with other unexpected surprises, “global growth could be muted further next year,” according to many economists and market analysts.
The government, for its part, announced that it is targeting a 6.5% to 7.5% growth rate for next year. Most of this would rely on “the implementation of recently passed reforms – such as the amendments to the Public Service Act, Foreign Investment Act, and Retail Trade Liberalization law – allowing greater foreign participation in the economy.” These are supposed to encourage private investment and strengthen growth in the country over the near and medium term.
In conclusion, here is the consensus on the performance outlook of the market for 2023 and 2024: The PSEi will hit 6700 by the end of 2023; with an inflation rate of 4.0%, the PSEi will hit 7300 -7500 in 2024; market resistance is placed at 6300 (11.7x PE), 6700 (12.4xPE), 7100 (13.1xPE); and market support is placed at 5900 (10.9xPE), 5700 (10.6xPE), 5200 (9.6%PE). – Rappler.com
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