Stock market investors will be watching out for the June inflation figure to be released this week while becoming more optimistic as COVID-19 starts to ease and the vaccination drive gains momentum with the arrival of vaccines ordered by the private sector.
“The improving COVID-19 situation in the Philippines with the country already being classified as a low risk area by the Department of Health may help in sustaining positive sentiment next week,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
AAA Equities Head of Research Chris Mangun also noted that, “Optimism has outpaced cautiousness as vaccination progress outweighs the concerns of elevated COVID-19 cases (more than 5,000 per day).”
“While herd immunity is still a distant goal and the Delta variant remains a threat, quarantine restrictions are expected to be further relaxed over the next few months if vaccination numbers and down-trending COVID cases are to go by, which should cast upward pressure on GDP and earnings numbers by the second semester,” said 2TradeAsia.com.
Tantiangco added, “The economic recovery hopes brought by the return of the IHS Markit Philippines Manufacturing PMI to expansion territory in June, and the better employment figures in May may still provide support to the market.”
“Most expect it to be slightly higher than the 4.5 percent that we have seen in the last 3 consecutive months. We expect it to come in closer to 5 percent due to higher global oil prices but anything above that will be a concern and will hamper the economy's recovery as well as the general investor sentiment,” said Mangun.
Adding to this is the rise in consumer sentiment according to the Bangko Sentral ng Pilipinas’ second quarter 2021 survey.
But, Tantiangco said “The economic recovery hopes however could be tempered by the decline in business confidence also according to the BSP’s survey.”
Meanwhile, he said investors are also expected to watch out for the upcoming June inflation data to see if the price pressures weighing on the local economy have eased.
Finally, investors are expected to remain cautious while waiting for the latest financial reports following the end of the 2nd quarter. Given all of these, we may see sideways movement for the local market with an upward bias next week.
“After having trounced the 7,000-mark, the PSEi needs to make a convincing base in the 7,000-7200 level to match last wave's peak of 7,330-7,400,” said 2TradeAsia.com.
BDO Chief Market Strategist Jonathan Ravelas said last week’s close at 7,002.26 highlights the market’s vulnerability to sell-off despite closing at the week’s high.
“Continue to expect the market to range between the 6,700-7,000 levels in the near-term. However, a sustained fall below the 6,700 levels could signal that the market could retry the 6,300-6,500 levels and reignite the bears to play,” he warned.
Amid all these factors, Philstocks Research and Engagement Officer Claire Alviar is recommending a BUY on Metropolitan Bank & Trust Company with a target price of P57.98 and a holding period of 9 to 12 months.
“The bank’s bottomline is projected to perform better year-on-year as loan loss provisions are expected to decline compared to last year,” she said adding that, the weight of non-performing loans “can be mitigated by MBT through the use of the Financial Institutions Strategic Transfer Law.”
Meanwhile, Abacus Securities Corporation is favoring International Container Terminal Services and First Gen Corporation even tough they have become more expensive since the start of the pandemic.
However, it noted that, “these companies' forward earnings estimates have risen faster than their share prices.” Abacus said “We continue to recommend both companies for different reasons. ICT is a global reopening play and there may be further scope for valuations to expand. FGEN, on the other hand, looks to be bulking up its long-term generation pipeline.