The local stock market will be waiting for the US inflation report this week but is seen to start weaker due to the latest US jobs report but tempered by some bargain-hunting.

“Next week, the local market is expected to move sideways with a downward bias within its 5,700 support and 6,000 - 6,100 resistance range,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted that, “We may still see bargain hunting in the market since it remains at attractive levels with a price-to-earnings ratio of 15.58 times as of October 7, 2022, below its last 5-year average of 20.58 times.”

“However, a breach of the 6,000 - 6,100 resistance range may not be seen yet amid the lack of positive catalyst that could drive optimism,” Tantiangco said.

He also pointed out that, “lingering concerns from the Philippine Peso’s weakness, to inflationary risks in the Philippines, to the hawkish monetary policy outlooks of the Federal Reserve and the Bangko Sentral ng Pilipinas may weigh on sentiment.”

“Worries over further rate hikes by the Fed could be strong this week following the US’ strong September labor market data. This week, investors may also look towards our balance of trade and foreign investment data for cues,” Tantiangco added.

“Eyes will be on US September CPI due next week which, combined with US jobs data due late this week, will build a picture of how the Fed will move in November,” said online brokerage firm 2TradeAsia.com.

It explained that, “Stubborn inflation could force the Fed to extend restrictive policy until 2023... Protracted hawkish policy increases the risk of a hard landing and tilts downward pressure on 2023 valuations, especially as most equity plays are currently cyclical.”

“This supports some weakness in the medium-term, as inflation has yet to show signs of material deceleration,” the brokerage noted.

While the PSEi was able to bounce back near the 6,000 level, 2TradeAsia.com said the trek above it will depend on broader market fundamentals being more accommodative for 2023.

“Stick to gradually picking-up value plays, keeping in mind that if economic cycles in the past are to be believed, at some point inflation will come down, and doves will come back,” it advised.

As market sentiment remains bearish, Abacus Securities Corporation advises investors to remain defensive or be choosy especially to those who are willing to buy into names at current prices.

“One defensive play that we believe investors with longer time horizons could find beneficial is looking into high dividend or yielding stocks,” it noted.

Among such stocks, Abacus said its top pick it LT Group as it is “the cheapest conglomerate (currently, trading at 3 times price-to-earnings ratio). In the past weeks, LTG has been moving closer to its 52-week low at P8.00 per share, where the yield would be closer to 19 percent.

“We may see another set of payout in November and with the expected volatility in the market, this could be a consolation of holding into LTG as it is also expected to maintain its yield in the short-to- medium term,” the brokerage said.

Another high-yield stock chosen by Abacus is GMA7 because of its major rival's loss of a national franchise in 2020 and this year's election ad spending boost.

“We expect its high dividend yield to be sustainable at least until next year, when this year's election boost is expected to be paid out, and as long as attempts by ABS to regain a nationwide free TV platform are thwarted,” it noted.

Abacus also favors Semirara as coal prices have remained resilient, staying above $400 per metric ton.

“It appears that our free cash flow to equity (FCFE) forecast of P5.00 per share for SCC is turning out to be a conservative estimate, as previously-shelved coal plants going back online in Europe suggests that demand for coal would likely be sustained moving forward,” it added.

Abacus also pointed out that, “The continuous purchase of SCC shares from the open market by company directors and officers also points to another cash dividend this month that we expect to be extra special.”