PSEi Composite expected to see moderate gains ahead.

Outlook: PSEi Composite index is assigned short-term Ba3 & long-term Ba3 estimated rating.
AUC Score : What is AUC Score?
Short-term Tactic¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Deductive Inference (ML)
Hypothesis Testing : Multiple Regression
Surveillance : Major exchange and OTC

¹Short-term revised.

²Time series is updated based on short-term trends.

Key Points

The PSEi Composite index is projected to exhibit moderate growth, driven by robust domestic consumption and anticipated infrastructure developments, alongside improving investor sentiment. However, this positive outlook faces significant risks; global economic uncertainties, particularly related to potential interest rate hikes by the US Federal Reserve and any escalation of geopolitical tensions, could trigger market volatility and dampen investor confidence, potentially leading to significant corrections. Furthermore, domestic inflation, if it remains elevated, along with potential supply chain disruptions, could negatively impact corporate earnings and subsequently constrain the index's upward trajectory.

About PSEi Composite Index

The Philippine Stock Exchange index (PSEi) is the benchmark stock market index representing the performance of the top 30 publicly listed companies in the Philippines. These companies are selected based on specific criteria, including market capitalization, trading activity, and free float level. As a crucial indicator of the overall health of the Philippine economy, the PSEi reflects investor sentiment and market trends. Fluctuations in the index are closely watched by investors, analysts, and policymakers alike, providing insights into market volatility and economic growth.

The PSEi serves as a primary tool for portfolio management and investment decision-making for both domestic and foreign investors. The component companies span various sectors, offering a diversified perspective on the Philippine economy. Index performance often mirrors global market trends, influenced by both domestic and international economic developments, geopolitical events, and investor sentiment. The PSEi's movements are frequently discussed in financial news, providing a gauge of the market's direction and performance.

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Machine Learning Model for PSEi Composite Index Forecasting

Our team of data scientists and economists proposes a machine learning model to forecast the Philippine Stock Exchange (PSEi) Composite index. The model leverages a combination of technical and fundamental indicators. Technical indicators will encompass historical price data, including moving averages (simple and exponential), Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and trading volume. These factors capture market sentiment and price trends. Fundamental indicators will incorporate macroeconomic variables such as GDP growth rate, inflation rate, interest rates (policy and lending), and unemployment rate. We will also incorporate financial performance data of the top component stocks within the PSEi, including revenue growth, earnings per share (EPS), and debt-to-equity ratios. To enhance the model's performance, sentiment analysis from news articles and social media related to the Philippine economy and the PSEi will be incorporated, providing a timely insight into market expectations.

The core of the forecasting engine will be a hybrid machine learning approach. We will initially explore both supervised and unsupervised learning techniques. Supervised learning models, particularly Recurrent Neural Networks (RNNs) and Long Short-Term Memory (LSTM) networks, are ideally suited for time-series data, allowing us to capture the temporal dependencies in financial markets. We will also evaluate the performance of other methods, such as Support Vector Machines (SVMs) and Random Forest models. Unsupervised learning techniques, like clustering algorithms, can identify distinct market regimes and patterns. The final model will likely be an ensemble model, combining the strengths of various algorithms. Feature engineering will involve creating lagged variables and calculating volatility measures from the source data. Model validation will involve splitting the data into training, validation, and testing sets, using walk-forward validation to assess the model's ability to generalize to unseen data. The model will be calibrated to minimize forecast errors like Root Mean Squared Error (RMSE) and Mean Absolute Percentage Error (MAPE).

The model's output will be a time series of forecasted PSEi index values, allowing us to generate predictions for the near and medium-term. The forecast horizon will be dynamically adjusted based on model performance and data availability. Furthermore, the model will provide probabilistic forecasts, estimating the range of potential future index values. The team will continuously monitor the model's performance, re-training it with new data and adjusting the parameters to ensure optimal accuracy and robustness in changing market conditions. Regular model audits will be conducted to identify and mitigate biases and improve interpretability. Output from this model will be used to generate actionable trading strategies and risk management decisions, enabling informed investment decisions.

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ML Model Testing

F(Multiple Regression)^6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Deductive Inference (ML))^3,4,5 X S(n):→ 6 Month $\sum _{i=1}^n\left(s_i\right)$

n:Time series to forecast

p:Price signals of PSEi Composite index

j:Nash equilibria (Neural Network)

k:Dominated move of PSEi Composite index holders

a:Best response for PSEi Composite target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do KappaSignal algorithms actually work?

PSEi Composite Index Forecast Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

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Philippine Stock Exchange Index (PSEi) Composite: Financial Outlook and Forecast

The Philippine Stock Exchange Index (PSEi) Composite, the benchmark index for the country's stock market, is currently navigating a complex economic environment. The outlook is significantly shaped by both domestic and global factors. Domestically, the Philippines is experiencing moderate economic growth, driven primarily by consumer spending, government infrastructure projects, and a recovering tourism sector. The recent inflation rate, while moderating, remains a key consideration, influencing monetary policy decisions by the Bangko Sentral ng Pilipinas (BSP). Corporate earnings are showing mixed results, with some sectors, particularly those related to consumer staples and infrastructure, demonstrating resilience. However, the banking sector faces increased scrutiny due to potential asset quality issues. Internationally, the PSEi is susceptible to global trends, including interest rate decisions by the U.S. Federal Reserve, the geopolitical climate, and fluctuations in commodity prices, especially oil and gas, which impacts energy companies and the broader economy. Investor sentiment is being carefully monitored, with concerns about global economic slowdowns and potential shifts in foreign investment flows. The PSEi's performance will hinge on the Philippines' ability to manage these internal and external pressures effectively.

The financial forecast for the PSEi is cautiously optimistic in the medium term. The expectation is for continued, albeit potentially slower, growth compared to earlier periods. This is based on ongoing infrastructure projects and resilient consumer spending, alongside a recovery in tourism. The easing of inflationary pressures, if sustained, is expected to provide some support, potentially allowing for more accommodative monetary policies. Further, the country's relatively young and growing population supports long-term economic fundamentals. Key sectors to watch include telecommunications, financial services, and real estate. These sectors are positioned to benefit from ongoing digitalization trends, financial inclusion initiatives, and property development activities. The market is anticipated to see periods of volatility, influenced by global events, particularly changes in interest rates and geopolitical uncertainties. The capacity of companies to adapt to the digital economy and the success of government efforts in attracting foreign investment will be crucial factors influencing the direction of the PSEi's trajectory.

The PSEi's performance will depend on its ability to mitigate potential risks. Monetary policy adjustments by the BSP is crucial. Increased interest rates could have a negative impact on corporate earnings and investment, while rapid depreciation of the Philippine peso could affect the earnings of some companies and increase inflation. Political stability is another important factor. Any political uncertainty could impact investor confidence and market sentiment. Geopolitical risks, such as escalations in international conflicts or trade wars, are also significant concerns. These events may impact the global economy and could create a knock-on effect on the PSEi. Finally, the performance of the PSEi is closely linked to broader economic growth. Economic slowdowns, both domestically and globally, can decrease corporate earnings and weaken investor confidence. The government's fiscal policies, particularly related to infrastructure spending and business environment reforms, will play a pivotal role.

In summary, the forecast for the PSEi is slightly positive. The index has the potential for modest gains in the near to medium term, driven by domestic economic growth and continued recovery in some sectors. However, this positive outlook is contingent upon several factors, including the sustained moderation of inflation, stable political conditions, and the absence of major global economic shocks. The key risk to this prediction is a sharp global economic downturn, which could significantly reduce investor confidence and lead to a significant decline in the index. Also, unexpected increase of inflation rate would pose a severe threat to the index. It's therefore crucial to monitor the global and domestic economic situations very carefully. Prudent management of these risks is essential for the PSEi to realize its potential for moderate growth and sustainable development.

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Rating	Short-Term	Long-Term Senior
Outlook	Ba3	Ba3
Income Statement	Baa2	B3
Balance Sheet	Baa2	Baa2
Leverage Ratios	Baa2	B3
Cash Flow	Caa2	Caa2
Rates of Return and Profitability	Caa2	Baa2

*An aggregate rating for an index summarizes the overall sentiment towards the companies it includes. This rating is calculated by considering individual ratings assigned to each stock within the index. By taking an average of these ratings, weighted by each stock's importance in the index, a single score is generated. This aggregate rating offers a simplified view of how the index's performance is generally perceived.
How does neural network examine financial reports and understand financial state of the company?

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