The local stock market is seen to start weaker due to the extension of quarantine measures although investors’ sentiment will also be swayed by the October inflation figure as well as corporate earnings reports.

“The failed hopes of downgrading the National Capital Region’s alert level by November 1 may cause some selling pressures by this week’s start,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.

He added though that, “Still, the downtrend in our COVID-19 cases, if sustained, may provide support to the market this week since it raises the possibility of restrictions being eased in the government’s next deciding period.”

Tantiangco noted that, “The year-on-year growth in bank lending last September, a reflection of improving economic conditions, may also give a boost to sentiment.”

However, the release of the October inflation rate this week poses a downside risk. “If it would come in faster than September’s 4.8 percent, then it may cause negative sentiment in the market,” he said.

Online brokerage firm 2TradeAsia.com said “Next week's FOMC Press Con, in tandem with October inflation announcement, should collectively shape the macro-outlook for the month, especially heading into the close of the fourth quarter 2021.

“Recall that, as of last September's minutes, the Fed could begin its tapering program as early as mid-November; with inflation pressures in the developed world hitting harder than expected, a more hawkish Fed leaves regional central banks with less wiggle room to sustain the accommodative stance required to make economic recoveries,” the brokerage said.

It added that, “While the BSP has more legroom than most it contends with (mostly supply-side} inflation issues that are expected to remain elevated until the first half of 2022; in that case, October inflation maintaining September's downtrend should ease near-term worries.”

Meanwhile, 2TradeAsia.com warned, “Expect supply pressure as the broader market finds its identity above 7,000, especially as the IPO market wrestles for liquidity in the coming weeks.”

BDO Chief Market Strategist Jonathan Ravelas said last week’s close at 7,054.70 “highlights the near-term top is in place at the month’s high at 7,326.10. Expect consolidation within the 6,950-7,300 levels in the near-term. But if 6,950 gives way, this could lead to further losses towards the 6,300/6,500 levels.”

Among the stocks to watch, COL Financial and Abacus Securities Corporation both list Metro Pacific Investments Corporation due to the projected growth in its tollroad revenues and the signing of a new concession agreement for it water business.

“Investor sentiment on MPI could improve going forward as the new concession agreement will ease uncertainties on Maynilad, as well as concerns on MPI’s other regulated core businesses,” said COL.

It noted that, “Based on MPI’s current market price, the company is trading at a (huge) discount to its (net asset value) which implies that Maynilad and its toll road business are already worthless. MPI is also trading below its 46 percent stake in Meralco.

For its part, Abacus said “MPI has been the worst performing index stock over the past 5 trading days. It has fallen close to 10 percent, worse than the 2 percent drop in the PSEi and wiping out about two-thirds of its October rally.”

“This is surprising given the relatively good third quarter results and steady stock price of MER. Moreover... vehicle throughput at MPTC may have improved significantly in the third quarter,” it added.

Thus, Abacus said any further drop in MPI may be an opportunity for a trade as its subsidiaries should report relatively good numbers while the conglomerate reports earnings on November 10.

COL is also recommending a BUY for Meralco despite the temporary impact on earnings primarily brought about by the COVID pandemic.

It noted that Meralco share price is underperforming the PSEI while its valuation has also become increasingly attractive with the stock trading at 14.4 times 2022 earnings, below its 10-year historical average of 17.5 times.

Abacus also likes Fruitas Holdings because it should be a reopening play as it continues to push its efforts to grow topline while maintaining margins in its store expansion.

“Its aggressive community store expansion should continue to help its recovery to reach pre-pandemic levels while its mall kiosks continue to deal with low foot traffic. This may be one of the small caps that may be worth watching,” it noted.