By James A. Loyola
Confidence in the stock market is waning with local investors staying on the sidelines due to uncertainties brought by rising inflation while foreign funds continue to sell out in favor of US securities.
“With the BSP (Bangko Sentral ng Pilipinas) raising interest rate and inflation numbers coming in slightly below the BSP estimate, investors are still not confident to get back into this market,” said Eagle Equities Head of Research Christopher Mangun.
In this scenario, Mangun expects the market to drop further although “retail investors will continue to speculate and bet on second-liners.”
For its part, online brokerage firm 2TradeAsia.com said that, “risks tied to inflation should make it appealing to diversify in stocks, even on defensive mode” especially since bargain stocks have become even cheaper.
“Participants’ focus will be on nine-month earnings results… Until the selling pressure ebbs, most might opt for defensive bets, especially for stocks worth holding for the long-term with sustainable dividend yields,” it added.
Top online brokerage firm COL Financial is recommending investors to buy Ayala Corporation shares after it raised its fair value estimate to P1,094 per share after factoring in the higher valuation of AC Energy’s power assets.
“We raised our estimate for AC Energy from P66.25 billion to P90.8 billion (which includes the expected proceeds of P31 billion from the sale of AA Thermal). This raised our NAV estimate on AC from P1,107 per share to P1,146 per share, and our fair value estimate from P1,055 per share to P1,094 per share,” COL said. “We maintain our BUY rating on AC as capital appreciation potential to our fair value estimate remains attractive at 17 percent.” COL Is also recommending a buy for Metro Pacific Investments Corporation because, “as a result of the changes in our earnings estimates for Meralco and NLEX, our 2019 earnings forecast for MPI increased by 32 percent to P16 billion.”
However, COL noted that they reduced the 2020 net income forecast by 15 percent to P11.3 billion as the projected drop in MER’s net income will more than offset the higher net income of NLEX.
Mangun warned “the index failed to close above the 7,200 support level which means the bottom that we saw back in July may not be the bottom that we had hoped for. Next key-support level is at 7,000, and if that doesn’t hold there is no telling how low this market can go.”
He added that, “the alternative is that the index holds at 7,000 and we get a ‘double bottom’ but looking at the market sentiment we are leaning towards the first scenario.”
Mangun noted that, “the BSP has said that we have seen the worst of inflation in September but if crude oil prices continue to rise then so will inflation. Nothing is giving investors the peace of mind to get back into the market.”