Stocks to take cues from China, November inflation

Published December 1, 2019, 12:00 AM

by manilabulletin_admin

By James A. Loyola

Local investors will join global markets in waiting for China’s response to the signing of the Hong Kong bills while waiting for the November inflation rate which will be announced later in the week.

“Locals will keep in touch with November inflation next week (December 05), with the BSP’s last policy meeting for this year (December 12) in mind,” saiod online brokerage firm 2Tradeasia.

It noted though that, “November inflation figures may come in higher than last month’s 0.8 percent, as base effect of last years peak fades (5.7 percent in October 2018, plus seasonal demand-side pressures.”

The start of December will be hounded by uncertainties in US-China trade relations and seasonally thin volumes, as the Yule break mounts.

“However, bargain-hunting opportunities may present themselves during such lulls, especially in the context of local firms’ capex buildup, in tandem with on-time public spending budget for 2020,” 2Tradeasia said.

The firm said immediate support for the market is at 7,500 to 7,550 while resistance is at 7,900.

For BDO Chief Market Strategist Jonathan Ravelas, last week’s close at 7,738.96 “highlights downward momentum is accelerating.”

“A break below 7,700 opens the gate for a test of the year’s low at 7,514.05levels, which could occur in the near-term. Brace for impact,” he added.

As investors may start positioning for listed firms’ prospects for 2020, Abacus Securities Corporation is recommending a buy for Cebu Air saying it had a great performance in the third quarter.

“It posted a loss, but excluding hedges and forex, the results were better than expected especially since July-September is usually the weakest quarter for the airline. As long as jet fuel costs are stable, 2020 could be a standout year for CEB,” Abacus noted.

It also likes San Miguel Food and Beverage as “its food business is on a recovery track that will accelerate into both the fourth quarter and 2020.”

Citing the rapid rise in chicken prices, the low cost of feed inputs and a stronger peso, Abacus said “the ingredients for a strong quarter are definitely present. We reiterate our call to buy on dips.”

While recently listed Fruitas Holdings closed near its offering price after initially surging upon listing, Abacus said the firm’s fair value (FV) should be around P2.50 to P3.20 per share.

“Using historical benchmarks of Jamba Juice and B&S International (milk tea retailer), we believe the range of possible FVs is between P2.50 which is 25 times to 30 times next year’s earnings (B&S traded as high as 60 times shortly after listing and 31 times in the past 12 months) to P3.20 at 2.6 times price/sales (valuation upon privatization),” said Abacus.