Despite headwinds buffeting the global economy, the local stock market is seen to benefit from some bargain-hunting as well as window-dressing by fund managers this week.
“With already three straight weeks of decline, episodes of bargain hunting may be experienced in (this) week’s trading,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
For its part, 2TradeAsia.com advises clients to “Brace for quarter-end window-dressing activity from funds” even “as the macro-environment remains volatile.”
“Still, bearish sentiment is expected to remain weighing on the overall market amid lingering downside risks,” said Tantiangco.
He added that, “This includes the weakened Peso which is already nearing the 55.00 per US Dollar level; mounting upside risks to inflation; and the possibility of a global economic slowdown amid the recession risk in the US, and the ongoing Russia – Ukraine War.”
Tantiangco noted that, “investors may also look towards the Philippines’ upcoming S&P Global Manufacturing PMI for clues over the local economy.”
Meanwhile, 2TradeAsia.com said “Feelers for first half 2022 results are already on the horizon, which are crucial input in confirming valuations. This is in the context of the broader market pulling back in lieu of massive shifts in macro conditions.”
It said that, while the market sentiment is bearish, some firms may not fare as badly as others. Thus, 2TradeAsia.com said investors should look for firms that have “low forex exposure, low import dependence, low floating rate loan mix, and ample working capital, among other metrics.”
Among Abacus Securities Corporation’s bargain picks is SM Investments Corporation noting that, “Our view is that the earnings recovery of all its main units, but especially retail, has been under appreciated.”
“We also believe that it is the conglomerate that is best poised to take advantage of consumers’ revenge spending… we are relatively certain that if/when foreign funds do come back, SM will be one of the best plays because of its status as a proxy for the Philippines as a whole,” said Abacus.
Philstocks is recommending a BUY for BDO as the bank “is one of the undervalued stocks that we see recovering gradually from the pandemic.”
While many firms are expected to take a hit from rising interest rates, this may have a positive effect on banks’ topline due to higher interest income particularly if the loan demand can be sustained.
“For long-term investors, we recommend accumulating on dips… Then the target price would be at P168.00. However, short-term traders may trade within the P121 support level and P133.50 resistance,” it advised.
Meanwhile, COL Financial has upgraded its forecasts for D&L Industries to account for its outperformance relative to the brokerage’s estimates in first quarter of 2022.
“After factoring in our adjustments, our fair value estimate on DNL increased by 4.4 percent from P9.10 per share previously to P9.50 per share.
It explained that, “We believe DNL is in a prime position to capitalize on the recovery of the economy given its diversified portfolio of products catering to different consumer groups.”
COL added that, “DNL remains relatively resilient to rising input costs given its strong pricing power and its portfolio of high margin specialty products. Moreover, the company is a beneficiary of the growing popularity of health, wellness, and sanitation trends brought about by the pandemic.”