With the enhanced community quarantine (ECQ) all set to take effect all over Metro Manila for two weeks starting August 6, a lot of people are disturbed about what lies ahead. For one thing, there is the highly infectious Delta variant spreading nationwide. There is also the potential economic damage and the effects ECQ will have on many workers.
And then there is the local stock exchange. While many investors are constantly looking on different directions and varied factors to decide what to do with their respective investments, the COL Financial Group recently revised its end-of-the-year estimate for the Philippine Stock Exchange (PSE) but their new prediction still points to a higher count than what the current index shows.
To put things in perspective, posted below is an excerpt from the Philippine News Agency (PNA) article. Some parts in boldface…
Online stockbroker COL Financial Group expects the Philippine Stock Exchange index (PSEi) to end the year at 8,100, slightly lower than previously projected, supported by optimism for faster economic recovery and earnings growth.
COL chief equity strategist April Lynn Tan said their forecast for PSEi has been reduced from 8,300 considering the lower earnings incurred by property companies as their mall operations are affected most by the implementation of enhanced community quarantine (ECQ).
The National Capital Region (NCR) will be placed under the most restrictive ECQ from Aug. 6 to 20 to prevent the spread of the more infectious Delta coronavirus variant.
This, after the one implemented from May 17 to April 13, 2021 to stem the country’s coronavirus disease 2019 (Covid-19) surge.
“We cut our earnings forecast and fair value estimates for the property companies given that they are part of a lot of the big holding companies that also dragged our fair value estimates. (But) an 8,100 target is still significantly higher from where we are today. That is why, we keep on saying that the negatives are priced in,” Tan said in a virtual press briefing Monday.
She said companies are “coping well” with the pandemic, adding that almost all sectors, except the property sector, reported higher year-on-year earnings.
“The reason why companies were able to deliver higher profits in the first quarter of this year compared to last year even though we are still in the pandemic is because they have adapted to the pandemic scenario by cutting cost and of course they also benefited from the lower tax rate, thanks to the CREATE (Corporate Recovery and Tax Incentives) law,” Tan said.
President Rodrigo Duterte last March 26 signed into law the CREATE Act reducing the corporate income tax rate by 5 to 10 percent for micro, small and medium enterprises (MSMEs) and other corporations.
Moreover, Tan said they remain bullish of the stock market on the back of efficient vaccination efforts and inflation reaching its peak.
Predicting the future is very unpredictable no matter what category gets discussed. Remember when the International Olympic Committee (IOC) predicted a brighter post-Olympics future for the city of Rio de Janeiro in relation to hosting the 2016 Summer Olympic Games? What happened after Rio Olympics were lots of unfulfilled promises, deteriorating facilities and a lot of embarrassment.
Going back to Philippine stocks, the COL Financial Group showed lots of details in their explanations of their 8,100 index end-of-2021 prediction. They were right to point to the CREATE Law which itself was a factor in the spike of foreign direct investments (FDI) in the country last April. The CREATE Law effectively reduced the corporate income tax rates for micro, small and medium enterprises (MSMEs). From this point on, it is interesting to see how the CREATE Law will impact the national economy and the local stock exchange in the months to come.
Let me end this piece by asking you readers: If you are an investor, what can you say about COL Financial Group’s end-of-the-year prediction for the Philippine Stock Exchange? Are you confident that the economic stakeholders, the businesses and investors will emerge stronger starting with the end of the next ECQ period until the end of the year? Is the CREATE Law positively impacting your business and/or investments?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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Author Carlo Carrasco 