Stocks: Eyes on inflation, Congress

Published January 5, 2020, 12:00 AM

by manilabulletin_admin

By James A. Loyola

The local stock market is seen to be influenced by the release of the December inflation rate as well as the resumption of Congressional session with an eye towards the 2020 budget and the ABS-CBN franchise.

“Local headlines should start to be abuzz, with the resumption of Congressional session on January 6. The highlight would be on President Duterte’s signing of 2020’s fiscal budget, continuation of key tax reforms and rollout of infra-based fiscal spending for the year,” said online brokerage firm 2Tradeasia.

It noted that, “December’s inflation appears to have already been factored-in with consensus seen higher for the month in review, but nonetheless considered benign on a full year average perspective (estimated average of 2.4 percent).”

The brokerage added that while the first two trading days were weighed down by the issues surrounding ABS-CBN and the water concessionaires, the market seems to have “relatively priced-in the issue, with buyers queuing in line for prospective rebound.”

“Market price-to-earnings ratio has come off to 14 times, presenting upside opportunities based on historical 19 to 21 times price-to-earnings ratio. The boost would center on an expected kick in fiscal and consumer spending, that should carry the bourse towards the 9,000 goal,” 2Tradeasia said.

Thus, it advises investors to “check for trading opportunities in price movement volatility, to realize gains. The key approach would be to balance portfolio selection, capitalizing on recovery once anxieties dissipate.”

After announcing its stock picks for 2020 earlier, Abacus Securities Corporation is also advising investors to take a look at the so-called “Dogs of 2019” or the worst performing index stocks last year.

While the Dogs of 2018 slightly underperformed the Philippine Stock Exchange index last year, these fare better compared to 25 to 30 percent of the available pure equity funds in the local market.

“Given its low maintenance and no frills nature, we reiterate that this ‘dogs’ strategy is a viable alternative for some investors,” said Abacus.

Last year’s 10 worst performers are DMCI Holdings, LT Group, Jollibee Foods Corporation, Metro Pacific Investments Corporation, Manila Electric Company, Megaworld Corporation, Ayala Corporation, PLDT Inc., Puregold Price Club, and Metropolitan Bank and Trust Corporation.

Abacus pointed out that “This is a mechanical strategy that doesn’t take into account fundamentals at all. Nevertheless, 2020 may prove to be a year when our dogs have a chance to widely outperform the Phisix. In our view, many of 2019’s worst have a strong chance of rebounding this year.”