All eyes will be on the outcome of the US elections this week while third quarter earnings and lingering concern over COVID-19 will provide cues at the local front.
“The local bourse will weigh local and foreign catalysts this week. It is expected to establish a support line then bounce from that level,” said Philstocks Financial Research Analyst Claire Alviar.
She noted that, the PSEi may follow the performances of the US markets amid the election and negative sentiment from the resurgence of Covid-19 cases.
Online brokerage 2TradeAsia.com warned that, “unlike its iterations in previous years, the 2020 elections outcome may not be announced on the same day; this exacerbates speculation, and with it, higher volatility. As a rule, markets tend to be jittery in any power shifts as many other concerns are tied to this year's US showdown. Funds may remain guarded until the terrain becomes less uncertain.”
“Meanwhile, we think that the decision of the government to keep Metro Manila under the general community quarantine (GCQ) is mixed given the lingering restrictions but this seems to be more biased to the positive since the economy is reopening already,” Alviar added.
She said, “We are also expecting better economic data to be released next week, starting from Markit Manufacturing PMI in October and October inflation rate. These may spur positive sentiment as these are expected to reflect economic recovery."
Meanwhile, 2TradeAsia.com said at least nine more large cap stocks will be reporting their third quarter results soon noting that, “confirmation in the next weeks that earnings may have bottomed in the second quarter will improve investor confidence heading into 2021 and help close out the gap.
Alviar said “the market is expected to establish a support zone around 6,000 to 6,100, then possible bounce in that area is anticipated as investor participation is increasing… Also, we've seen foreigners lately coming back in the market which is a good sign that could help sustain the rally.”
Based on the market’s recent rally Abacus Securities Corporation is recommending investors to buy shares of ICTSI as it is the long loser among index stocks.
“It is already trading at 22 times next year’s earnings but the potential for third quarter surprise is there as various global agencies have revised global 2020 GDP forecasts higher (less negative),” it explained.
Meanwhile COL Financial is recommending Puregold even though “earnings will likely remain weak in the fourth quarter of 2020 due to the impact of the pandemic, we only expect this to be temporary. The steady reopening of the economy will also be beneficial for PGOLD, and this should help the company perform better in 2021.”
COL is also maintaining its BUY rating on BDO Unibank and Bank of the Philippine Island “although net interest margin is expected to be pressured next year as loans gradually re-price amid the low interest rate environment.”
This is because “We believe most of the negatives have already been priced in. We continue to like BDO and BPI as we expect them to be among the major beneficiaries of the economic growth after the effect of pandemic eases.”