The local stock market is not seen to make a big bounce from last week’s fall due to rising concerns over the spread of the COVID-19 Delta variant while oil prices continue to go up.
“While this week’s decline provides bargain hunting opportunities, we still see a downward bias for the local market next week,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He explained that, “This is due to the risk posed by the COVID-19 Delta variant including its spread throughout the world which may weigh on the global economic recovery.”
Tantiangco warned that, “Detection of more cases with the said variant in the Philippines may strengthen the negative sentiment.”
He noted that, “Investors are expected to remain cautious while waiting for the 2nd quarter corporate results. Investors are also expected to watch out for the movement of oil prices and the local currency.”
A further rise in oil prices and/or a further depreciation of the Peso is seen to have a strengthening effect on inflation which, in turn, would weigh on the local economy.
“Add that the depreciation of the peso may discourage foreigners from investing in the Philippines,” said Tantiangco.
He said the market may also take cues from the upcoming release of Foreign Direct Investment and OFW Remittance data by the government next week.
BDO Chief Market Strategist Jonathan Ravelas said “concerns over the spread of the COVID-19 variants cloud global growth expectations, thus, dampening domestic investor sentiments on the country’s recovery prospects.”
He added that, the PSEi’s close at 6,834.92 last week “highlights the market’s vulnerability to a sell-off despite the recent high at 7,064.24.”
“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 to 6,500 levels and reignite the bears to play,” Ravelas warned.
Abacus Securities Corporation is recommending a BUY on liquor firm Emperador Inc. “as it may do better than other Philippine stocks that have decided to list in Singapore given its momentum in the past few years.”
Also noting the growing taste for whisky globally, Abacus advised investors to buy Emperador shares on dips in market price, probably when it is deleted from the PSEi.
The brokerage is also recommending another consumer stock, San Miguel Food and Beverage Inc. noting that “consensus earnings for FB are too low.”
“To explain, recurring net income in the first quarter was already P6.0 billion which, if annualized, would easily exceed the consensus estimate for next year,” it added.
Abacus also noted that, “this figure is 67 percent higher compared to the first quarter of 2019 despite the fact that its beer division is well below its pre-Covid sales level.”
“Given that the eventual reopening of the economy will be a net positive for FB… we believe that the stock is undervalued at this point,” it stressed.
Meanwhile, Abacus also favors Cirtek Holdings Philippines Corporation as it continues to collaborate with customers to develop expansion plans and had started to procure additional equipment to address the surge in demand amidst the current global chip shortage.
“With some industry players now expecting the chip shortage to extend into 2023, TECH should be in a good position to benefit. Things could take an even better turn if subsidiary Quintel is finally able to gain traction in the 5G antenna space. Hopefully, this also materializes soon,” it added.
For its part, COL Financial has a BUY rating on Robinsons Retail Holdings Inc. after its share price has declined by 15 percent year-to-date, severely underperforming the PSEi.
“The company is also still trading 22 percent lower compared to its pre-pandemic price, despite having good recovery prospects. We think this is not justified given that RRHI is poised to fully recovery above pre-pandemic levels next year based on our forecasts,” it added.
COL noted, “In the medium-to-long term, RRHI remains well positioned to capitalize on retail growth opportunities with its diversified portfolio of store formats. Furthermore, growing e-commerce trends bode well for the company given its increased focus on building its online presence.”