The local stock market is seen to continue to be weighed down by concerns over rising inflation and its impact on monetary policy and consumption both here and abroad while investors will keep an eye on remittance and balance of payments data.
“The local market is seen to have a downward bias next week amid inflation and monetary policy concerns. By week’s start, investors are expected to digest the US’ May inflation print which accelerated further,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He added that, “Consequently, worries over the possibility of a more aggressive policy stance from the Federal Reserve may also kick in. Thus, next week may start on a bearish tone.”
“Breathing down the market's neck is the US Fed's expected 50-bps hike (this) week, just as US May inflation is expected to print red-hot (over the) weekend,” said 2TradeAsia.com.
“Concerns over the Philippines’ inflation is also seen to dampen sentiment amid the upside risks which are already in play including rising fuel and electricity prices, weakening of the Peso, and the increase in minimum wages,” Tantiangco said.
Because of this, he noted that, “worries over how hawkish the Bangko Sentral ng Pilipinas’ policy outlook will be is also seen to weigh on the market.”
“May inflation print further rose to 5.4 percent, reinforcing more aggressive monetary moves over the coming months, The magnitude of hikes remains debatable, but wild be increasingly crucial vis a vis the upcoming economic team's push to put the country at a better fiscal position,” 2TradeAsia.com said.
Tantiangco said investors are also expected to watch out for our OFW Cash Remittance and Balance of Payments data this week.
“When markets are left to speculate market risks and uncertainties, the result is volatile prices that reflect internal value plus/minus some emotion tied to these uncertainties. Accumulate on dips,” advised 2TradeAsia.com.
Abacus Securities Corporation has a BUY recommendation for Vista Land and Lifescapes as “We believe VLL will outperform over the next 6-12 months despite being the worst performing property stock this year, on the back of its strong margins, resilient revenues, and may be the first among its peers to return to pre-pandemic profit levels.”
The brokerage also likes D&L Industries which “is poised to grow faster as it benefits from a weaker peso and free cash flow should be greater than profit growth going forward.”
“Investors should remember that DNL is one of the few listed firms benefitting from a weaker peso. Exports grew more than 60 percent last year and were up 45 percent in the first quarter so dollar receipts are now greater than dollar-denominated input costs. With the exchange rate (at P53.00 to the dollar), DNL is poised to grow faster,” Abacus said.
The brokerage also has a BUY ratibg for PLDT because of a 20 perncet upgrade in its 2022 earnings forecasts compared to six months ago, which is the best among index stocks.
“Earnings for 2022 are also expected to be above pre-pandemic levels, and the stock is still trading below its net asset value, while the successful closing of a portion of the company's tower sale recently could translate to special cash dividends anytime soon,” said Abacus.
Meanwhile, COL Financial has upgraded Converge to a BUY despite a downgrade in its net income forecast, “as the recent sell-off in CNVRG shares was too steep.”
“Moreover, the industry remains underpenetrated which should enable the company to maintain its double-digit growth pace in the next few years,” it added.