The local stock market is seen to remain volatile this week due to the ongoing invasion of Ukraine by Russia and its impact on oil prices and inflation.
“We may still see a turbulent week ahead for the local market amid the lingering uncertainties on the Russia - Ukraine conflict,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He noted that, “While the anticipated rollback in local fuel prices may offer the market short term relief, the lack of significant progress between the Russia - Ukraine negotiations may still weigh on investors’ sentiment.”
“The lack of significant progress on their talks poses upside risks to global oil prices, and hence, to our inflation and even trade deficit,” Tantiangco explained.
The market is also expected to watch out for the Bangko Sentral ng Pilipinas’ Monetary Board meeting this week.
“More than the policy rates which are expected to remain unchanged, investors are seen to watch out for the BSP’s inflation outlook for the local economy,” he added.
BDO Chief Market Strategist Jonathan Ravelas said the PSEi has been weak lately as investors continued to trim their holdings on expectations that a combination of rising prices of commodities, a weaker peso and higher interest rates will weaken earnings growth.
“Last week’s close at 7,007.63 highlights the bears are in control. Continue to see the market to range between the 7,000 to 7,150 levels in the near-term. However, a sustained fall below the 6,950 could call for further losses towards the 6,300 to 6,500 levels,” he added.
With the reopening of the economy and the improving earnings of banks, COL Financial has a BUY rating for Security Bank, China Bank and Philippine National Bank.
For Security Bank, COL said “we are maintaining our BUY rating as the upside to our target remains attractive... we believe that its intermediation business will improve as loan growth should recover amidst easing quarantine restrictions, increasing vaccination rate, and declining COVID-19 cases.”
The brokerage likes China Bank because “We expect its lending business and fee-based revenues to pick up as economic growth rebounds... In addition, we continue to like the bank’s low exposure to consumer loans at 20 perccent of total loans, bulk of which are mortgage loans. Recall that we view auto, credit cards, and SME segments to be the most at risk in asset quality during this pandemic.”
COL also expects PNB to benefit as the economy gradually recovers, noting that the bank’s asset quality was severely impacted by the COVID-19 pandemic as its gross NPL ratio is one of the highest in the industry.
“On the positive side, asset quality outlook has gradually improved following the easing of restrictions in Metro Manila as well as increasing inoculation rate in the country,” it expained.
Meanwhile, Abacus Securities Corporation likes Atlas Consolidated Mining Corporation among mining firms because it produces copper (which has long term demand) after noting that nickel prices are about to ease.
“Bloomberg quoted an Indonesian Minister as saying the country is set to add up to 400,000 tons of nickel in metal output capacity this year and another 500,000 next year,” noted Abacus.
It added that, “Coordinating Minister for Investment and Maritime Affairs Luhut Panjaitan said further that they are ‘confident that with this additional capacity, there’s more than enough to offset any lost supply from Russia or other places.’”