The local stock market is seen to be weighed down by expectations of an interest rate hike by the US Federal Reserve and by the reaction of central banks across the globe to this move.

“Next week, the local market may continue to move with a downward bias as investors watch out for the upcoming policy meetings of the Federal Reserve and the Bangko Sentral ng Pilipinas,” said Philstocks Financial Research Manager Japhet Tantiangco.

According to 2TradeAsia.com, “US CPI disappointing earlier last week set the stage for risk-aversion to permeate global markets, as expectations are now for the Fed to increase rates by at least another 75-bps by next policy meeting (Sept. 20-21).”

“It is very likely that the BSP will mirror this hawkishness, albeit gentler, for fear of a hard landing. While we have accounted for higher cost of capital in our forecasts, the materially higher yields in debt securities takes some shine away from equities, especially at a time where some sectors, by their nature, will take some earnings erosion from higher cost of debt and a weaker Peso,” it added.

However, Tantiangco said “We may see episodes of bargain hunting as the market lies at attractive levels but the general mood is still expected to be bearish.”

He noted that, “the BSP may also act aggressively amid the demand side risks to our country's inflation, and the weakening of our local currency which also poses upside risks to the rise of our general price level. A 75 basis point rate hike by the Fed which puts more depreciation pressure on the Peso may lead to a 50 basis point rate increase by the BSP.”

“The sensible path is to retain key exposure in dynamic but resilient sectors that can generate reliable cash flow despite seesaws in the macro backdrop; these include names in banks and power, and high dividend yield plays,” said 2TradeAsia.com.

It added that investors should “devote energy to strategic positioning, as emotional or data-exhausted markets tend to open buying windows.” COL Financial also believes banks and consumer companies could lead the market higher once it recovers from the correction given the said companies’ strong earnings performance during the rst half as mentioned earlier.

It noted that, “The median net income growth of banks that we monitor reached 33.4 percent during the first half as banks enjoyed faster loan growth, higher margins and lower provisions. Moreover, five out of the nine banks that we monitor outperformed expectations.”

“Consumer companies, led by retailers and restaurants, also surprised positively as the favorable impact of the reopening of the economy and cost cutting measures more than o set the negative impact of rising inflation,” said COL.

It noted that, “Aside from URC, DNL and PGOLD, holding companies SM and GTCAP are good proxies for consumer spending given SM’s shares in SM Retail and GTCAP’s shares in Toyota Motors Philippines. Both companies also own shares in banks (BDO and MBT) which likewise performed well during the first half.”

Meanwhile, Abacus Securities Corporation upgraded Bloomberry from Trading Buy to Buy on the company’s positive outlook and attractive valuations.

“Shares of Bloomberry have rallied 16 percent since our Trading Buy call last August 9 and the stock has rallied 36 percent since bottoming out in late June,” it noted.

Abacus pointed out that, “Management appears confident that Solaire can reach pre-Covid run rates by the end of this year or early 2023. If so, then 2023 earnings consensus is definitely on the low side.”