The Philippine stock market may take a breather at the start of the week following its strong rally last week but investor sentiment may be swayed by the announcement third quarter results by some index heavyweights.

“The local market staged a strong rally but, with the quick surge, the local bourse is now at the overbought territory making it susceptible to profit taking,” said Philstocks Financial Senior Analyst Japhet Tantiangco.

He added that, “Downside risks to the market include the possible reacceleration in the daily increase of COVID-19 cases, and negative spillovers from overseas markets primarily from Wall Street which could come about if no deal or progress is made from the US fiscal stimulus talks.”

However, Tantiangco said “The PSEi may hold its ground at the 6,000 to 6,100 support range buoyed by optimism towards the further easing of restrictions on economic activities.”

Investors could also look towards the upcoming data for further cues including the Philippines’ September money supply and bank lending data, and third quarter corporate reports.

Online brokerage firm 2TradeAsia.com said “Large caps BDO, Meralco and Puregold will announce earnings this week, which would set the tone for trades.”

It explained that these issues have a combined market capitalization of P900 billion and account for 10.7 percent of PSEi and are also as proxies for their respective industries, being sector leaders.

It advised investors to have a longer horizon because “the goal should be the recovery story of 2021 and 2022. Accumulate gradually.”

Bank of the Philippine Islands was among the first large caps to report its third quarter performance and COL Financial is recommending the bank’s shares.

“Although we believe there could be negative sentiment once the bank’s non-performing loan ratio starts increasing in the third quarter and net interest margin will be pressured next year as loans gradually re-price, we believe most of the negatives have already been priced in,” COL said.

It added that, “We continue to like BPI as we expect it to be one of the major beneficiaries of the economic growth after the effect of pandemic eases.”

On the other hand, Abacus Securities Corporation is recommending BDO Unibank ahead of its earnings report today (Monday) because of the bank’s lesser reliance on trading gains, higher percentage of consumer and middle market loans, as well as its highest market share of cost bank deposits.

It also noted that “The stock is currently trading extraordinarily cheaply,” adding that this presents a significant long-term upside (more than two years) despite the headwinds the bank is facing.

Abacus is also rating AllHome Corporation a BUY because it fell more steeply than its chief rival and its stock price is thus much cheaper.

“HOME is trading at about 18 times earnings which is a third lower compared to that of (Wilcon). On enterprise value to EBITDA, the stock is also about 40 percent lower than the regional average. The discounts become even wider on 2022 numbers. What makes this more interesting is that consensus estimates appear to be conservative,” Abacus said.

It noted that “conservative forecasts hike the odds of positive earnings revisions going forward…those who want a cheaper alternative (to Wilcon) may want to add HOME to their respective portfolios.”