The local stock market is seen to remain volatile this week despite growing optimism over the recovery of the country’s economy amid the surge in COVID cases fueled by the Omicron variant.
“Next week, we may see selling pressures take over the market following its 3.57 percent rally last week. The said rally may not yet be sustainable as investors are expected to maintain a cautious stance,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He noted that, “This is as economic losses are still mounting given that the alert level 3 restrictions have been extended in the National Capital Region and other key economic areas, and have been implemented in more parts of the country.”
“At the same time, COVID-19 cases are still on the rise, keeping the risk of tighter social restrictions at the table,” Tantiango said.
He added that “Offshore concerns, particularly the Federal Reserve’s possible monetary tightening this year amid the US’ hot inflation, may also continue to weigh on sentiment.”
Online brokerage 2TradeAsia.com said Fed Chair Jerome Powell announced that raising interest rates faster than currently planned is on the table, after US December inflation hit 7 percent.
“This stance change has been reflected in Fed officials' expectations of up to 3 rate hikes in 2022, versus zero to at most one rate hike communicated last August 2021,” it noted.
The brokerage added that, “Emerging markets now have to contend with elevated inflation of their own economies and currency volatility, at a time when governments run higher debt than usual--no thanks to the pandemic.”
It pointed out though that, “Hawkish Fed behavior do not always usher doom. First, so long as US rate hikes are well telegraphed and are effective in curbing inflation, the negative impact regionally should be benign and less challenging to maneuver around. Second, local assets have some leeway versus regional peers, as the CPI moderated in December and the BSP is more shored up with multiple modes of intervention on the ready.”
2TradeAsia.com also noted that, “There are arguments that the country has reached or is near to reaching the crest in Omicron's infection curve. Trends in recent trading sessions show that markets seem to agree.”
“Against a constantly changing backdrop, flexible trading strategies reign supreme—these include picking inflation hedges when needed, and switching exposure from highly cyclical growth plays to defensives when the COVID-19 curve steepens,” it added.
Betting on a recovery after the Omicron surge and higher election spending, COL Financial is recommending consumer stocks Puregold Price Club and Robinsons Retail Holdings Inc.
COL said it is also cautiously optimistic on the property sector’s recovery post Omicron and is looking favorably at Ayala Land, Megaworld, and Robinsons Land Corporation for the reopening play.
It also noted that banks will benefit from the continued recovery of the economy and names BDO Unibank, Metrobank and Bank of the Philippine Islands as its top picks for the sector.
Abacus Securities Corporation is also upbeat about the local banking sector as its non-performing loan ratios are below projections, “which is one of the reasons why we expect loan growth to return to double digit growth this year.”
It also noted that, “BDO is said to be forecasting loan growth of 10 percent to 12 percent this year. We believe this is quite doable, partly because of a low base over the past 2 years and due to the expected growth of the economy.
“We expect strong profit momentum this year as a higher loan book will be complemented by higher net interest margins and falling loan loss provisions. We therefore reiterate our overweight for the sector and for BDO itself,” Abacus said.
Meanwhile, it said “We believe FGEN would benefit the most from the ongoing yellow alert in Luzon. With the stock trading at only 6.5 times 2022 price-to-earnings, FGEN appears to be a low-risk buy.”