Stocks to take cues from Fed, BSP meetings

The brewing crisis in the banking sector overseas is seen to continue to threaten the local stock market this week although investors will also be looking for cues from the results of the US Federal Reserve and Bangko Sentral policy meetings.
“Trading next week could remain challenging as banking worries may continue to weigh on the market,” said Philstocks Financial Research Manager Japhet Tantiangco.
He added that, “Also next week, the local market is expected to take cues from the monetary policy meetings of the Federal Reserve and the Bangko Sentral ng Pilipinas.”
“While a 25 basis point increase is already projected for each, investors are seen to be more interested in hints with respect to their policy direction,” Tantiangco noted.
He explained that, “Cues that would point to a still long monetary tightening path ahead may weigh on the local market, while hints of the monetary tightening ending soon may boost sentiment.”
Online brokerage 2TradeAsia.com said that “‘What will the Fed do next?’ is the theme du jour of 2022, with a continuation in early 2023 given sustained inflationary pressure globally.”
“This however is more crucial in the coming week in lieu of the US banking sector apparently having a heavily distressed quarter, after the collapse of Silicon Valley Bank earlier this month, followed by other smaller banks' announcing strained balance sheets,” it added.
The brokerage said that, “Liquidity crunch fears aside, the Fed's next step will dictate the tone of global central bank moves this quarter, as policy might turn dovish in the short-term to stop the contagion from spreading to the rest of the world.”
It noted though that, “the ECB already defied expectations by continuing to hike rates, citing that inflation remains paramount. It will be interesting how authorities will intervene while calming panicked markets, but heavy volatility is all but inevitable (as was also observed for much of this week).”
Pointing out that that long-term fundamentals risk profile of local banks remain mostly intact, or at least not as vulnerable, 2TradeAsia.com said “the recent slide can be an opportunity to double-down on some value plays.”
With banks in mind, COL Financial has a BUY rating on PNB because its views PNB as a deep value play since the bank is trading at a low price compared to its book value. “We expect loan growth to improve as the economy continues to recover and as the bank continues to build up its portfolio,” it said.
Meanwhile, COL and Abacus Securities Corporation have BUY ratings for Robinsons Land specially after its 2022 earnings beat forecasts.
“We maintain our BUY rating on RLC as as robust consumer spending should benefit the second biggest mall operator in the Philippines. Meanwhile, RLC maintains a positive outlook on its residential segment, despite interest rates as its net take-up sales have seen five straight quarters of sequential growth,” COL said.
Meanwhile, Abacus noted that the market continues to undervalue RLC and its price-to-earnings ratio is now at its lowest in more than 10 years despite the company being resilient during the pandemic.
It also pointed out that RLC’s 2022 mall revenues already accounted for 98 percent of the 2019 level even though it still gave over P1.2 billion in rent concessions last year.
Both COL and Abacus also favor Universal Robina Corporation as also exceeded expectations in 2022.
“We are upgrading our forecasts to factor in URC’s better-than-expected topline performance in 2022 and slightly tempering our short-term margin expectations,” said COL.
It added that, “Moving forward, we expect growth to be underpinned by URC’s strong core branded businesses where it has continued to post market share gains in most consumer goods categories and new product developments. Moreover, we expect bottomline growth to be supported by margin recovery given softer lock-in costs for key inputs such as wheat and crude palm oil, partly offset by rising prices of coffee and potato.”
Abacus said it believes that URC is in a better position that its competitor to capitalize in 2023 as it works its way in recovering margins. It also noted that URC is reducing the gap in market share with the leading branded biscuits manufacturer Monde Nissin.