It’s bound to be a better year for the Philippine economy. Inflation has peaked, and prices are returning to normal.
Sun Life Investment Management and Trust Corporation (SLIMTC) Chief Investment Officer Ritchie Teo presented this market outlook in a recent media conference.
Growth and inflation outlook
“Based on the latest gross domestic product (GDP) forecast, we anticipate a 6% growth for 2024. Higher consumption and private investments largely drive it. On the other hand, the consumer price index (CPI) will average 3.8% for the year,” Teo said.
“However, a couple of risks may arise. For example, a severe El Nino can affect commodity prices and delay the execution of infrastructure projects.”
Interest rates
The SLIMTC executive spoke about the policy rates of the Bangko Sentral ng Pilipinas (BSP). He said the improvement in inflation is a key consideration for the BSP to cut rates. “We expect rate cuts to start by late second quarter. We likewise anticipate a total of 100 basis points for 2024 to further provide liquidity in the system,” he stated.
Meanwhile, global investors are more optimistic this year than in previous years. Policy easing by the US Federal Reserve (Fed) should support both bonds and equities.
“We see the Fed pausing on rates. Then, by mid-year, we expect three to four rate cuts, for a total of 75 to 100 basis points. US inflation returning to target should give the Fed confidence to finally cut rates this year,” Teo said.
Philippine equities
Teo expects the Philippine Stock Exchange index to reach 7200 by end-2024. However, he mentioned that the market now needs to stay above 6,700 to maintain the momentum. He also anticipates an EPS growth of 8.4%. Property, banks, and consumer discretionary players in the stock market should drive it.
Given these developments, Teo advises both institutional and retail clients to consider local equities. Many of them continue to remain in the money market.
“Corporate earnings remain strong, and EPS is already well above pre-pandemic levels,” he reassured. “Should foreign flows continue to come, this would be key to a rally towards our year-end target.”
