Stocks ripe for correction

Published February 10, 2019, 12:00 AM

by manilabulletin_admin

By James A. Loyola

Stock analysts are warning investors that the local market should be making some “healthy” corrections soon, considering its impressive rally since the start of the year.

Traders work beneath an electronic ticker at the trading floor of the Philippine Stock Exchange in Bonifacio Global City (BGC).(Bloomberg file photo)
Traders work beneath an electronic ticker at the trading floor of the Philippine Stock Exchange in Bonifacio Global City (BGC).(Bloomberg file photo)

“With local gauges already 20 percent up since 6,843 last November 13, anticipate breathers to set in to strengthen this climb,” said online brokerage firm

As such, stock analysts advise investors to lock in gains made in past weeks although noting that there are still a few stocks worth picking up due to their compelling stories.

For cherry-picking, Abacus Securities Corporation is recommending laggard First Philippine Holdings Corporation because, “despite already rallying by 14 percent year-to-date, FPH still trades at a huge discount from its net asset value.”

“Considering the attributable equity value of its subsidiaries FGEN and ROCK, along with its minority interest in MER and a few unlisted subsidiaries, subtracting parent net debt and preferred shares, and applying a 30 percent discount, we arrive at a NAV per share of P95.80 per share, which strays far from its current price of P74.00,” said Abacus.

For top online brokerage firm COL Financial, worth buying is SM Prime Holdings after it raised its fair value estimate to P40.70 per share from P33.70 due to higher land value assumption.

COL is also reiterating its support for Cemex Holdings Philippines after the recent sale of Holcim Indonesia which resulted in higher valuations for its local counterpart Holcim Philippines and translating to higher estimates for other local cement firms.

Eagle Equities Head of Research Christopher Mangun noted that, “despite the PSEi ending in the red last week, the uptrend is still intact. As a matter of fact, the pullback strengthens the rally as it keeps a cautionary sentiment and allows more investors to get back in.”

“There are two things that we are looking at right now that may continue to fuel the rally, earnings reports and foreign inflows. These may serve as a catalyst for the market to continue its climb. However, if earnings disappoint or if foreign money ceases to flow in, we may continue to see it trade between 7,800 and 8,100 for the following weeks as it builds momentum to go higher in the longer term,” he added.

For, investors should also watch for the MSCI’s upcoming rebalancing on February 11.

It added that, “with the status quo on interest rates already factored into prices, attention would switch to sequels on consumer price trend, starting with hints of higher February electricity generation charges and implementation of increased water tariffs from rebasing.”