The local stock market is seen to remain volatile this week due to the upcoming release of earnings results of some index heavyweights as well as the inflation figure for February.

“Inflation expectations are expected to be one of the main drivers of the market ahead of the release of the February consumer price index data,” said Philstock Senior Analyst Japhet Tantiangco.

He added that, “We see a downward bias for the local bourse amid elevated inflation expectations that has just gained support from the Bangko Sentral ng Pilipinas’ range projection of 4.3 to 5.1 percent which is above the government’s target.”

“A surge in inflation is seen to aggravate the situation of our struggling economy which is still trying to recover from the pandemic induced recession,” Tantiangco explained.

For its part, online brokerage 2TradeAsia.com said the inflation report “will be a crucial cog in monetary policymaking (and ultimately un valuations).”

It noted that, “Any print above January’s 4.2 percent will likely not be appreciated, as this pace is nearly reminiscent of the second half of 2019 inflationary period, when the BSP turned hawkish—not exactly what the market needs as of this moment.”

Tantiangco said “Investors are also expected to monitor the US’ bond yields which have been a concern of equity markets around the world lately. A further rise in the yields may result in more foreign fund outflows from our local market which in turn will add to the downward pressure.”

Meanwhile, 2TradeAsia.com said “Another major wave of earnings results from index heavyweights Meralco, Metro Pacific, Semirara, PLDT, and ICTSI may drive volatility, particularly given their market-leading positions in their respective capital-heavy sectors.”

The firm noted that, “The next big impetus, as we have repeatedly stressed, will be on the national vaccination drive; pending any headline on that front, expect volumes to cycle towards speculatlive second- and third-liners, as broad market uncertainty may likely push funds to make quick in-and-out trades.”

BDO Unibank Chief Market Strategist Jonathan Ravelas said last week’s close at 6,794.86 signals downward pressures remain. 

“A sustained break  below the 6,700 levels could see a test towards the 6,500 levels. Any pullback could be limited towards the 6,800,” he said.

Among the stocks analysts are favoring is Cosco Capital which recently announced that it is spinning off its liquor distribution businesses into Da Vinci Capital.

Abacus Securities Corporation said “the restructuring is a great way to bring out the value of COSCO's Liquor distribution business and improve the company's valuation.”

It noted that, there is also the potential for Cosco to further enhance the group's net asset value by putting its lease properties into a real estate investment trust.

COL Financial also sees the spin-off as a positive for Cosco as it could potentially unlock shareholder value. “This is because COSCO is hugely undervalued with unlisted businesses such as the liquor distribution and real estate business being valued for free at COSCO’s current price,” it noted.

“The separate valuation for the liquor distribution business could help lift COSCO up from its severely undervalued position,” COL added.

On the other hand, Philstocks is recommending that investors buy BDO Unibank shares and “hold for the long-term given the anticipated recovery while being one of the undervalued stocks in the market.”

“We are expecting BDO to rebound this year, along with the economy, particularly with the passage of the FIST bill which may help the banking sector,” the brokerage said.