While the stock market will obviously be reacting to the conduct and the outcome the elections, it will also have its eyes on the release of the first quarter gross national product figure as well as more corporate earnings results.
“Chartwise, the PSEi’s 50-day exponential moving average (EMA) has already crossed below its 200-day counterpart forming a Death Cross which signals a possible further decline ahead for the local bourse,” said Philstocks Financial Senior Supervisor Japhet Tantiangco.
He added that, “Given this, the market is seen to have a bearish bias next week. Also backing up this bias is the threat of another fuel price hike this week which may amplify inflation worries, and the rising bond yields in the US.”
“Investors are also expected to monitor the results of our national elections with the hopes of a new administration that can properly address the economy’s existing problems including our increasing national debt, rising inflation, loopholes in the labor market, and lingering threats stemming from the COVID-19 pandemic,” said Tantiangco.
He noted that, “The meeting of such hopes may tilt the market’s bias to the upside.
“Power shifts tend to cause investor jitters in lieu of policy uncertainties and unwinding of execution risk, but also tend to benefit equity-holders in the medium-term owing to higher consumer spend and aggressive policy rollouts,” said 2TradeAsia.com.
It explained that, in the past three national elections, six month returns have amounted to about 20 percent.
“This year's polls, however, is starkly different from its past iterations, heading into what is hopefully the tail-end of the pandemic, in an inflationary global climate, and a rate-sensitive investment community; in other words, there may be more pent-up anxiety tied to fundamentals than ever before,” 2TradeAsia.com noted.
Meanwhile, Tantiangco said “Investors are also expected to watch out for our upcoming first quarter 2022 GDP data. If the data shows that our economy was able to keep its recovery momentum during the quarter, then it may also serve as a positive catalyst to the market.”
“Cherry-picking the best out of a number of options is the crux of portfolio management, and this is particularly true in times of heightened distress. Aim for underpriced but EPS-resilient assets, keeping in mind that there should be some respite when the dust settles (as history shows, it often does),” advised 2TradeAsia.com.
Based on recent earnings reports, COL Financial is maintaining its BUY rating on Universal Robina Corporation because of its market leadership position in several fast-moving consumer goods categories.
“While the company is facing several cost headwinds, we believe price hikes and structural cost improvements will help mitigate the impact of rising input costs,” COL said.
It added that, “The company’s scale and vertically integrated operations will also help it perform better compared to its competitors in this high-cost environment.”
COL also has a BUY rating for D&L Industries “since it is in prime position to capitalize on the recovery of the economy given its diversified portfolio of products catering to different consumer groups.”
“The company is relatively resilient to rising input costs given its strong pricing power and its portfolio of high margin specialty products. DNL is also a beneficiary of the growing popularity of health, wellness, and sanitation trends brought about by the pandemic,” it added.
Abacus Securities Corporation also has a Buy rating for D&L, citing its 12 percent growth in first quarter earnings which was ahead of consensus.
“It may not seem like much of an outperformance relative to forecasts but the first quarter is usually or historically a low quarter so the absolute income level per quarter is likely to be higher moving forward,” it added.
The brokerage also has a Buy rating for Metrobank “as we believe that the negatives have already been priced in already, and that the bank’s strong asset quality means loan loss provisions going forward should remain low.”
It added that, “Metrobank’s conservative stance during the worst phase of the pandemic gives it a lot of headroom to be more aggressive as the economy continues to reopen.
Abacus said it will also be another good year for Semirara as benchmark coal prices are nearly double compared to the 2021 average and the firm expects to produce slightly more coal this year. It is also expected to suffer fewer outages for its power plants.