The local stock market is riding on bullish sentiment and will be looking for cues to gauge if this is sustainable such as the US gross domestic product figures for the second quarter which will be announced this week.
“US GDP for the second quarter will be announced this week, which will be interesting if only to gauge how the print will affect the Fed's stance in the coming quarters (if at all),” said 2TradeAsia.com.
It noted that, “Markets are gradually decoupling from policy rate gyrations as inflation is proving itself more structural than transitory. Looking past broader market turbulences, focus will be on earnings quality and growth expectations for 2023.”
“The local market has been riding on bullish momentum fueled by confidence towards the strength of the corporate sector evidenced by the robust results seen in our second quarter or first half company reports,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He said that, “Next week, investors are expected to watch out for catalysts that would point to the sustainability of the strong results we’ve seen in the 1st half. Lack of such is seen to lead to profit taking.”
“Also, macroeconomic concerns are expected to challenge the extension of the local market’s rally. This includes the still hawkish outlook of the Federal Reserve, the possibility of more rate hikes by the Bangko Sentral ng Pilipinas, the further widening of our Balance of Payments Deficit, and lingering supply problems in some of our country’s agricultural commodities,” Tantiangco warned.
According to 2TradeAsia.com, “There is a clear attempt for the benchmark index to get past the hurdle that is the 7,000-mark, retracing new resistance closer to 7,200 (where it was mostly in the first half of 2022).”
“Near-term fundamentals look supportive of this direction, as rate increases are all but baked into risk premia for the remainder of the second half, inflation is starting to be passed-on (reduced margin pressure at the corporate level), and more activity is expected to be generated in late third and fourth quarters (face to face classes, holidays),” it added.
The brokerage advised that, “In times of market exuberance-a rising tide lifts all boats, after all-the challenge is to stick to sturdy plays, the 'unsinkable' of 2023.” For stock picks, both Abacus Securities Corporation and COL Financial are recommending Security Bank after it posted a strong second quarter.
“The stock is trading very cheaply at just half of its book value and -1.8 standard deviations from its long-term mean, which we believe is unwarranted given the bank's recovery trajectory and the positive outlook for the sector as whole due to rising interest rates and loan demand,” said Abacus.
It added, “we observed that stocks that are removed from the index tend to perform positively over the 3 to 12 months after its deletion. All this is in SECB's favor, and we believe the downside is limited for the stock, which we are upgrading to Buy, with a target price of P159.”
“We currently have a BUY rating on SECB with a fair value estimate of P172 per share based on 1.00X 2022E price-to-book value,” said COL.
It added that, “We continue to like SECB as we expect it to be one of the major beneficiaries of the recovery of economic growth. Looking forward, we believe its intermediation business will improve amidst increasing mobility and a rising rate environment.”
Both brokerages also like SSI Group with Abacus saying “The company likely benefited from pent-up demand and revenge consumer spending with its target market being less affected by current economic headwinds such as high inflation.”
It added that, “For the second half of 2022, the company will likely see similar numbers in the third quarter as foot traffic continues to return in the malls, where SSI stores are located, before seeing another boost come the holidays season in the last quarter.”
For its part, COL said “SSI continues to benefit from easing mobility restrictions and from the return of foot traffic to malls. Despite cost headwinds from higher inflation and the weaker peso, SSI remains well-positioned to capture the rebound in discretionary spending given its core customer base and portfolio of established and upscale brands.”
COL also has a BUY rating for another retailer, Robinsons Retail Holdings “given its well-diversified portfolio of retail formats and positive long-term growth prospects. We think its recovery initiatives, especially the strengthening of its e-commerce platform, makes RRHI well-positioned to capitalize on future growth opportunities amid increasing digital trends.”