The local stock market is seen to continue to wait for fresh leads this week as foreign investors are seen to continue to leave while liquidity is seen to dry up due to the massive Monde Nissin initial public offering.
“Investors are still expected to look for tailwinds. If there will be none, worries over the local economy are seen to dominate sentiment which in turn may lead to a further decline in the local bourse,” said Philstocks Financial Senior Analyst Japhet Tantiangco.
He added that, “The market could move higher if there will be hints of further easing of restrictions in the NCR Plus after May 31. A further decline in the daily COVID-19 case counts of the country may also help spur positive sentiment.”
However, Tantiangco warned that an increase in the daily new cases,or a detection of more coronavirus cases with the variant from India may worsen the pessimism in the market.
“The local market may also take cues from overseas, primarily from Wall Street which is currently seen to be weighing the US’ economic recovery against the threat of rising inflation,” he noted.
Online brokerage firm 2TradeAsia.com said “The recent MSCI rebalancing, which comprised of mainly deletions, signaled that foreign funds' confidence in local equities may likely remain impassive in the near-term.”
It explained that, “This means a reliance in domestic liquidity to prop sentiment up. Noteworthy here is the P48 billion IPO of Monde Nissin which may cause cash holders to withhold from deployment until listing on June 1.”
“Listings of this size tend to funnel interest away from nearest peers (in this case, consumer staples), so it may be prudent to brace for thinned participation especially in names such as URC, FB, among others.
Tantiangco noted thoug that, “While still in a downtrend, the local market was seen to be showing signs of fighting. This past trading week, it had three positive sessions on the back of late-day buying, two of which were in the final minutes.”
“This has trimmed the market’s losses for the week. Also, the market managed to keep its position above the 6,100 support level,” he said but, “Trading also remained lethargic implying that many are staying on the sidelines. Investors are still looking for a catalyst that can induce market participation.”
Noting that the 6,000 support level was the springboard point of the recent rally rally in the fourth quarter last year, 2TradeAsia.com advises investors to hunt for opportunities to average-down or accumulate at this level.
“Specially for those that will banner stronger-than-ever stories in the next 6 to 12 months (cyclicals, power, commercial property),” it added.
BDO Unibank Chief Market Strategist Jonathan Ravelas said last week's close signals the market’s continued march towards the 6,000 levels is unfolding.
He warned that, “Should this decline accelerate in the coming days, it could put the 6,000 levels to the test and if it breaks, could put the 5,700 levels within striking distance.”
COL Financial has a BUY rating for Max’s Group after it returned to profitability even though risks remain such as the high unemployment rate, rising inflation rate, and elevated COVID-19 cases.
“Nevertheless, we believe sales will gradually recover as consumer confidence improves, particularly after COVID-19 cases starts to flatten and the government accelerates its vaccination program,” it added.
Both COL and Abacus Securities Corporation have are recommending Eagle Cement Corporation after its first quarter earnings were ahead of estimates.
“We remain optimistic on the construction industry’s recovery and consequently the improvement in cement demand this year. Moreover, we continue to like EAGLE because of its superior margins, strong balance sheet position, and capacity expansions,” COL said.
Abacus said “We expect EAGLE to be in the best position to weather the growing competition in the sector due to its margin leadership and strong balance sheet.”
Both brokerages also noted that EAGLE’s plant expansion which will start operations in the second quarter is expected to further boost earnings.
COL also has a BUY rating on GT Capital because it is trading at 9.4 times estimated 2021 earnings, significantly below its historical average of 15 times. Current discount to net asset value also remains near its historical high at 52 percent.
“While the negative sentiment could keep prices depressed in the short term, we believe that these challenges are transitory and that fundamentals remain attractive over the long term,” COL said.
Abacus also noted that GT Capital bears watching because subsidiary Toyota Motors Philippines is seen to sustain the strong first quarter growth in vehicle sales for the rest of the year.
COL is also recommending First Philippine Holdings Corporation “In line with the increase in our estimates for (subsidiary First Gen Corporation) and the passage of the CREATE Bill.
“Given FPH’s 68 percent ownership in FGEN, we view FPH as a cheaper way to own FGEN. FPH is trading at a huge 62 percent discount to its market based NAV of Php178 per share,” it added.