The local stock market is seen to be cautiously optimistic this week although it is still uncertain if it will have enough steam to breach, and stay above, the 7,000 resistance level.
“The local market may still take cues from our COVID-19 situation. Last week, our case counts have averaged 17,705 per day, lower compared to the preceding week’s 20,280. If the decline continues, then it may spur positive sentiment in the market,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He added that, “Investors are also expected to watch out for the government’s decision on the social restriction measures of the country after September 30. Easing of restrictions may send the local market higher.”
Meanwhile, Tantiangco said “The Bangko Sentral ng Pilipinas’ latest confidence surveys which show that consumers and businesses are optimistic for the upcoming quarter may also give a boost to sentiment next week.”
“Finally, investors may watch out for our upcoming IHS Markit Philippines Manufacturing PMI for clues on how the local economy is faring,” he said.
While the market shrugged off the Fed’s and BSP’s dovish move on policy rates as expected, online brokerage firm 2TradeAsia.com said “CPI (consumer price index) woes are likely to remain in the medium-term, as consumer demand gets the extra boost from election-related purchases.”
Thus, it said that, “in this case, prudence dictates some financial risk should be priced-in for interest-rate sensitive assets, especially as the Fed has yet to telegraph clearer moves on its asset purchases and its 2022 hawkish stance has not abated.”
“The glass ceiling that is 7,000 needs a stronger catalyst to shatter, beyond reopening themes or the BSP maintaining the status quo, that seems to be baked in prices as of the moment,” 2TradeAsia.com noted.
It also pointed out that, as 9-month earnings reporting looms, there may be more incentive to shift towards the “old reliable” or “those large to mid-caps that have the war chest to go full blast in 2022.”
“As underscored in our previous notes, there is a shift in momentum since the past few weeks, particularly based on flows—there seems to be an almost-tangible bias now towards blue-chips and midcaps.
BDO Chief Market Strategist Jonathan Ravelas said “investors remained cautious following developments overseas like embattled developer China Evergrande Group and the indication of the US Federal reserves that it could start tapering within the year and its recognition of higher inflation.”
He added that, “The 7,000 levels remains elusive and reflects a wall of worry (the pandemic, inflation woes, US taper are all just around the corner).”
Ravelas said last week’s close at 6,951.53 highlights continued consolidation within the 6,700 to 7,000 levels and advises investors to be on the lookout should the 6,700 levels give way as the next key support is at 6,500 levels.
While most investors are now waiting for third quarter earnings reports to decide which stocks to buy, Abacus Securities Corporation is recommending Ayala Corporation as its market price has yet to reflect recent surges in the prices of its subsidiaries.
“We took the combined price performance of each listed sub, weighted by the holding company’s percentage ownership,” said Abacus noting that Ayala “hasn’t fully benefited from the strength of some of its units, particularly the recent rally in Globe Telecom and the resilience of AC Energy.”
The brokerage said “This also adds conviction to our trading buy call on AC with target price of P1,000.” Meanwhile, COL Financial is favoring Aboitiz Power Corporation despite the delay in the start of the commercial operation of its Dinginin Coal plant.
“We like AP as we believe that the company’s earnings have already bottomed out (with first half 21 earnings increasing by 188 percent year-on-year following a 24.6 percent decline in 2020 due to the impact of the Covid-19 pandemic),” said COL.
It added that, despite the recent increase in the share price of AP (up 26 percent year-to-date against 4 percent decline of PSEI), its valuation remains inexpensive, trading at 12.6 times 2022 price-to-earnings ratio, compared to 13.6 times of domestic peers and AP’s 10 year historical PE ratio of 13.7 times.
Philstocks Research and Engagement Offficer Claire Alviar is recommending a buy for Metrobank because “this stock is undervalued with strong fundamentals, thus buying on dips is an opportunity for the long term.”