The local stock market will be looking out for the release of September’s inflation rate, the impact of rising oil prices on goods and services, as well as the filing of candidacies for next year’s national elections.
“Next week, the local market’s movement could depend on our COVID-19 situation, September inflation data, as well as on the movement of global oil prices and the local currency,” said Philstocks financial senior supervisor for research Japhet Tantiangco.
Noting that new COVID cases declined last week, he said that “if this continues this week, then it may give sentiment a boost.”
“The market however will be dealing with the September inflation data next week. If the September inflation rate comes out to be significantly higher compared to August’s 4.9 percent, then we may see a pessimistic reaction in the bourse,” Tantiangco warned.
The rising global oil prices with the Brent crude standing near the $80 per barrel mark is also seen to pose a downside risk as it is expected to strengthen inflationary pressures in the country.
“The BSP’s inflation forecast for September at 4.8 percent to 5.6 percent confirms our past notes' concern on heating prices, which will likely play an important role in the fourth quarter 2021 to first quarter 2022 outlook,” said 2TradeAsia.com.
It added that, “for one, while we do not expert any near-term change in policy stance, the higher print challenges the BSP’s room to stay dovish. Possible margin squeeze will be another concern especially for industries that cannot fully pass on costs and already have supply chain issues as it is due to remaining lockdowns.”
“In both cases, we also have to underscore the demand-pull impart corning from the holiday and election seasons; in this case, inflation hedges (and by extension interest rote risk hedges) may go thematic in the upcoming quarters,” the brokerage noted.
Tantiangco also said that, “investors, primarily those offshore, may also monitor the peso which has shown weakness this week. If the peso depreciates further next week, it may cause more foreign fund outflows which in turn would weigh on the local bourse.”
BDO chief market strategist Jonathan Ravelas said investors remain cautious following developments overseas like rising global commodity prices and the recent pronouncement of the US Fed that it could start tapering within the year and its recognition of higher inflation.
“The 7,000 levels remains elusive as it reflects a wall of worry (the pandemic, inflation woes, US taper just around the corner),” he noted adding that the market is seen to consolidate within the 6,700 to 7,000 levels.
After the sale of a 25 percent stake in AboitizPower to JERA of Japan, COL Financial is recommending a buy for AP shares “as we believe that the company’s earnings have already bottomed out.”
It added that, “valuation is also very cheap, trading at 12.9 times 2022 earnings per share, compared to 13.6 times price to earnings ratio of domestic peers and AP’s 10 year historical P/E of 13.7 times.” As it expects the PSEi to reach 7,300 this year, Abacus Securities Corporation advises its more bullish clients to add to current positions.
“If so, our best advice is look at some laggards that we like. From the following chart, we remain partial to Robinsons Land and GT Capital,” it said.
Abacus added that, “among non-index stocks, D&L Industries is possibly the best choice. The stock is down 2.5 percent in the last two months despite the fact that it should return to pre-pandemic profitability by yearend.”
The brokerage also likes Semirara Mining and Power Corporation as it “continues to benefit from coal's blistering run, as the average price of the dirty fuel in the third quarter soared by more than 50 percent quarter-on-quarter.”
“We believe it's likely that prices will at least be maintained until the end of the year, especially since coal stockpiles in many countries are still dangerously low at the onset of the expected cold weather. We expect SCC's coal shipments to stay strong in the second half of the year, as China's importations remain relentless,” it added.
Abacus also pointed out that, “the expected shutdown of Malampaya for twenty days in October might cause an uptick in spot prices, as Ilijan (840MW) and San Gabriel (414MW) will not be able to operate at full capacity. This should be beneficial for SCC's power companies.”