Elections, earnings to sway stock market

By James A. Loyola

The local stock market is seen to continue to weaken this week although its movement will largely be influenced by earnings reports and the conduct of the midterm elections and its results.

“From a technical standpoint, the main index looks to be going lower after the strong support at 7,800 was broken. The next support comes in at 7,640 and then 7,500,” said Eagle Equities Head of Research Christopher Mangun.

He noted though that, “We may see investors start to come back into the market as the awaited election ends next week, hopefully without any surprises. First quarter corporate earnings have also start to come in which will have better results than they did last year because of higher costs and inflation.”

Mangun said GDP is also expected to improve with a pick-up in government spending and as it starts kicking into full gear all the infrastructure projects that were set last year.

Online brokerage firm 2TradeAsia said that, while the direction of the PSEi is still hazy, investors should “accumulate selectively on weakness and hold on stocks with solid fundamental merits.”

Abacus Securities Corporation sees some profit in store for stocks of San Miguel Corporation (SMC) and its liquor unit Ginebra San Miguel (GSM).

Despite its weaker earnings, SMC is seen to get a boost as punters bet that it will be added to MSCI’s indices. On the other hand, Abacus sees GSM as undervalued, especially after reporting very strong recurring profit growth.

Meanwhile, Abacus sees San Miguel Corporation’s winning the bid for Holcim Philippines benefitting Cemex Holdings Philippines because “it is trading at less than half the implied valuation of Holcim.”

Abacus is also recommending to buy Metrobank stocks on dips as it has been oversold even though it grew its bottomline.

COL Financial also maintains its buy rating after factoring in the strong trading and foreign exchange gains in the first quarter.

International Container Terminal Services, Inc. is also in COL’s buy list after its earnings surged beyond estimates in the first quarter.

COL said it is raising its earnings forecast for ICTSI due to higher earnings and a reduction in operating expense estimates, resulting in a 7.8 percent hike in fair value estimate.

“Unable to climb past 8000, the PSEi will test its strength staying above 7,500 based on its trend. If this level is broken, the gauge could move within 7,000-7,300. Immediate support is 7700, secondary at 7,650, resistance 7,800-7,850,” said 2TradeAsia.