The local stock market may benefit this week from growing optimism as the economy reopens while COVID-19 cases decline although it will also take some cues from the release of economic data.
After the PSEi breached the 7,300 resistance level last year, Philstocks Financial Senior Supervisor for Research Japhet Tantiangco said “Next week, the market could be able to hold its position above the said level buoyed by improving economic prospects as restrictions in the National Capital Region and other selected areas in the country have been downgraded.”
“Sustaining the downtrend in our COVID-19 cases may also help the market trade higher next week since it could lead to the further easing of restrictions in the country,” he added.
However, he warned that, “Inflation concerns may challenge the market however as global oil prices continue to rally with the benchmark Brent Crude already surpassing $90 per barrel.”
According to 2TradeAsia.com, oil prices are rising as “demand continues to accelerate, and the Ukraine situation remains topsy-turvy.”
It added that, oil price surges “may cause some friction over the next one to two quarters. For one, a sizeable portion of the CPI basket is oil-sensitive, particularly Food & Beverage and Transportation.”
“Jitters on the inflation end can carry over to the BSP's first 2022 policy meeting on the 17th. While in the grand scheme of things, crude's sharp ascent may not factor into a surprise rate hike anytime soon, it may still drive investor aversion against fuel and forex sensitive sectors or those that may not be able to fully pass-on the higher fuel cost,” 2TradeAsia.com noted.
Meanwhile, Tantiangco said that, this week, “investors may also watch out for the upcoming labor force survey and foreign direct investments data for further clues on the local economy.”
Also seen influencing the market this week is the impact of the PSEi recomposition as funds may have to adjust their portfolios for the entry of Monde Nissin and Emperador.
With the PSEi having climbed back to its pre-COVID level, Abacus Securities Corporation is looking at individual stocks that remain under water and look at stocks that investors may find worthwhile picking up.
Among its picks of firms whose share prices have yet to return to their pre-COVID levels even though they are expected to exceed 2019 profits this year.
Among these, Abacus mentions Robinsons Land Corporation, Robinsons Retail Holdings Inc., D&L Industries, LT Group, and Puregold Price Club.
The brokerage noted that RLC’s mall revenues should recover faster than its residential and Office revenues as the economy reopens. RRHI is also seen to benefit from the increased mobility and a rebound in consumer spending.
Meanwhile, Abacus is recommending D&L because “Although the higher input prices will margins, we expect the company to be better positioned in weathering this storm compared to other consumer companies.”
“DNL has already reached its 2019 pre-pandemic levels and with the change in consumer behavior and trends, the company should be able to look beyond those levels,” it added.
Abacus also noted that, while LTG and Puregold “continued to grow earnings throughout the pandemic, but have not been rewarded by the market. As a result, their respective valuations are much cheaper today compared to two years ago.”
“Those looking for yield should add LTG as we forecast earnings and dividends to continue growing. PGOLD, on the other hand, should be a defensive play. Consumer spending will keep earnings buoyant and will not be impacted by the results of the May elections,” it said.