As the stock market seems to have calmed down from the initial panic reaction to the Omicron variant, investors will be watching out for inflation figures this week and see how central banks will telegraph their moves.
“Inflation will be a key theme for next week—or rather, the expected strategy of central banks for next year, which will largely be dictated by inflation trend starting December 2021,” said 2TradeAsialcom.
It noted that, “US CPI reading by the close of (last) week is anticipated to hit a multi-year high not seen since the 90s. In any case, capital markets will gyrate depending on the Fed's reaction by the latter half of next week during this year's last FOMC meeting.”
“Any aggression on the part of the Fed to speed up its tapering will impact interest rate outlook for next year, and leave risk assets guessing whether a rate hike is possible as early as the first quarter of 2022,” the brokerage added.
Philstocks Financial Senior Supervisor for Research Japhet Tantiangco said the market may also take cues from the Bangko Sentral ng Pilipinas policy meeting.
“While the keeping of policy rates at record low levels is already anticipated, investors may still watch out for the BSP’s outlook on the country’s inflation,” he explained.
Initial findings from the World Health Organization that the Omicron variant may be slightly milder than the Delta variant should ease fears exponentially, especially on the policy aspect locally, said 2TradeAsia.com.
“This means fundamentals for the fourth quarter of 2021 remain intact for now, which means businesses should enjoy elevated foot traffic and consumer spending seasonally,” it added.
BDO Chief Market Strategist Jonathan Ravelas said the market rose last week as economic recovery is gaining traction as the loosening of quarantine restrictions, declining virus cases and rising vaccinations help unleash pent-up demand.
“However, uncertainties regarding the omicron variant and the US Fed’s looming rate hike is capping the gains,” he noted.
Ravelas said last week’s close at 7,192.17 highlights consolidation within the 7,000 and 7,300 levels in the near-term.
“However, a sustained fall below the 6,950 levels will call the bears to test the 6,500 to 6,800 levels,” he warned.
COL Financial Chief Equity Strategist April Lynn Tan said “less popular holding companies will play catch up with their bigger and more popular peers and the index.”
Among these is GT Capital Holdings which will benefit from the reopening of the economy through subsidiaries Metrobank and Toyota Motors Philippines. She also noted that GTCAP is currently very attractive in terms of valuation.
COL also has a BUY rating for Petron Corporation noting that, while “we are wary of the emergence of the Omicron variant, we think that its impact will not be as damaging as the previous COVID-19 surges.”
“Moreover, we think that fuel demand in the country could be sustained as long as key industries and public transportation remain operational,” it added.
Meanwhile, Abacus Securities noted that coconut was a major contributor for the record-high exports segments for D&L Industries and Century Pacific Foods. Another beneficiary of the global heightened demand for coconut products is Axelum.
“The three companies are all confident on the outlook for its exports business citing resilient demand on the consumer shift to healthier alternatives,” it added.
Abacus is also looking at The Keepers Holdings Inc. as selling pressure may abate once the churn of its follow-on offering shares reaches about 70 percent to 75 percent “which may be in about two weeks.”
“We are a Buy on KEEPR but our advice is wait until then to add or initiate positions in the stock,” it added.
Meanwhile, Abacus said First Gen Corporation and Puregold “have been indiscriminately sold down during the recent pullback. We look to accumulate these two names at lower levels as their respective businesses should not be affected significantly even if omicron takes hold locally.”