Earnings, interest rates to dictate local stocks

Published July 14, 2019, 12:00 AM

by manilabulletin_admin

By James A. Loyola

Stock analysts hope the local market will receive a boost from second quarter earnings reports as well as the prospect of lower interest rates.

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)

BDO Chief Market Strategist Jonathan Ravelas said the market is taking its cue from the dovish commentary of US Fed Chair Jerome Powell which gives the local central bank more flexibility in lowering domestic rates.

He added that investors are also positioning ahead of the second quarter corporate earnings.

Ravelas said last week’s close at P8,141.82 “signals it is on track to challenge the 8,200 levels. A break above 8,200 could signal a break-out of the 7,500 to 8,000 levels consolidation and engage the bulls back to play to try the 8,500 levels.”

Looking ahead at prospects of listed companies in the second semester of the year, Abacus Securities Corporation is recommending some stocks that are seen to outperform the market.

Among these is Bloomberry in light of improving sentiment in Macau, Asia’s gaming capital, and because the stock is cheap relative to its regional peers.

The firm also advises investors to start accumulating Puregold because lower inflation is translating to higher sales while subsidiary S&R is benefitting from a stronger peso and its margins should improve noticeably in the third quarter.

Abacus also likes Metrobank as it is trading below its book value while it stands to benefit from the recovery in car sales.

It is also the cheapest among the country’s top three banks.

Filinvest Land also got a buy recommendation from Abacus because 40 percent of its earnings come from recurring sources making it a prime candidate for a real estate investment trust play.

Abacus also likes Pepsi-Cola Bottlers Philippines, Inc. due to its quick recovery from the effects of higher taxes while margins are improving due to lower sugar and packaging prices.

AAA Equities Research Head Christopher Mangun said the market needs to blow through that resistance and possibly end the week above 8,200 to avoid the possibility of a “double top” from a technical aspect.

“To be able to break past this resistance, we are going to have to see a pick up in trading volumes. If it cannot break above this level, we may see a massive selloff which could cause it to lose 400-500 points,” he warned.

Mangun said investors may gain confidence as second quarter earnings start to come in as these are expected to be better than in the last few quarters due to lower costs and higher spending.