Stocks to take cues from trade talks

Published October 13, 2019, 12:00 AM

by manilabulletin_admin

By James A. Loyola

The local stock market is seen to continue to take its cue from the US-China trade talks but any bounce this week is seen to be capped at the 8,000 level.

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

“The closer the index approaches 8,000, the more susceptible the market will be towards selling pressure,” said Regina Capital Development Corporation Managing Director Luis Limlingan.

He noted that, “investors will take their cue from any outcome of the trade talks, the latest conflict in the Middle East (two rockets just struck an Iranian tanker traveling the Red Sea), and any local or foreign economic data point that surprises on the upside or downside.”

BDO Chief Market Strategist Jonathan Ravelas said, “Last week’s close at 7,849.94 continues to highlight the market to consolidate within the 7,700 to 8,000 levels in the near-term, provided the7,500 levels does not give way. Expect the bounce to stretch towards the 7,900 to 8,000 levels in the near term.”

With the recent downturn, COL Financial Chief Equity Strategist April Lynn Tan pointed out that, “Philippine stocks are too cheap to sell.”

She explained that the PSEi is trading at only 15.4 times its price to earnings ratio compared to its five year historical average of 17.4 times.

Tan noted that, “domestic factors that fueled the bull market in July remain in place.” These include low inflation, easing monetary policies plus a possible rebound in gross domestic product.

“Once sentiment improves, there is much room for stocks to go up given the Philippine economy’s attractive outlook and stocks’ depressed valuations,” she said.

Meanwhile, COL Financial has upgraded its rating for DMCI Holdings from HOLD to BUY as its power and construction businesses are poised to benefit the government’s rising infrastructure spending.

“Earnings from its nickel mining business could also rebound as a result of the lifting of the suspension order on the Berong and Acoje Mines, further boosted by the prospects of rising nickel prices as a result of the pending Indonesian ore export ban,” COL added.

For its part, Abacus Securities Corporation is betting on Metrobank as it is historically very cheap after the stocks price fell well below its 10 year average price despite its decent projected earnings growth this year.

Abacus also likes recently listed AllHome which is trading at around 21.5 times its 2020 earning per share, below the 25 times average of its peers.

“The discount is attractive given the favorable growth outlook of the company which is expected to be faster than that of its peers,” the brokerage said.

 
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