Analysts are cautiously optimistic about prospects at the local stock market given the resilience showed by the PSEi last week although risks posed by global supply disruptions and inflation remain.

Last trading week, the local market managed to close still at its 7,000 - 7,100 support range. Also, the market was able to breach its 200-day exponential moving average. These are seen as positive signs for the local bourse,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.

He added that, “This week, the local bourse could move sideways with an upward bias on the back of the positive developments in its chart.”

“In addition, the business optimism towards the local economy’s outlook, as reflected in the Bangko Sentral ng Pilipinas’ latest confidence survey, may also give sentiment a boost,” Tantiangco said.

However, he noted that, “Oil and inflation worries may continue to temper positive sentiment amid the lingering uncertainties in the Russia - Ukraine conflict. A rally in oil prices next week may tilt the market’s bias to the downside.”

“Despite bias being slightly skewed to the upside, we recognize downside risks that can warrant a rerating prior to official first quarter of 2022 results,” said 2TradeAsia.com.

It said “global supply chains have been highly volatile in the past week; oil and gas has been a primary concern for locals (and for good reason) but other important commodities are behaving similarly as well (copper and nickel, steel, sugar, rice, among others) which can not only hurt margins in the near-term, but also cause shifts in global production lines.”

The brokerage also noted that a Covid-19 resurgence pattern has been observed in early March across Hong Kong, Eastern EU and New Zealand.

“While better immunization reassures that any future waves will not be as impairing as in the past, any lockdown or restriction risk still is still cause for concern, particularly for cyclicals that are currently struggling from fragile operating margins,” 2TradeAsia.com said.

Tantiangco said that, “This weel, investors may also watch out for the government’s decision on the alert level restrictions in the country after March 31. Investors may also watch out for the upcoming S&P Global Philippines Manufacturing PMI data.”

“The benchmark index moving at a particularly tight range softly confirms the general market's hesitance over major market forces at present,” said 2TradeAsia.com adding that, “risk premiums are still continuously going up over macro movements in Russia and Fed hikes, on top of local inflation pain points.”

With the economy reopening amid rising inflation, Abacus is recommending a BUY for two retailers, All Day Marts and Puregold Price Club, which it sees as having been sold down on the perception that they will not benefit from higher mobility.

“ALLDY announced its 2021 earnings with net income reaching P390 million, ahead of our estimates...While ALLDY has yet to provide more information on its year-end performance, the overall result should show that the long term prospects of the company remain intact as they continue to aim to reach 100 stores by 2026,” it noted.

Abacus added that, “Year-to-date share price performance has been weak with the negative sentiment on the supermarkets amid the economy reopening and followed by the overall market weakness caused by the tensions between Ukraine and Russia. We remain bullish on ALLDY on its growth prospects and we believe it is less affected by the recent commodity spikes compared to the other consumers.”

On the other hand, Abacus said Puregold was generally perceived as a “stay at home stock”
that benefitted during the height of the pandemic and investors might be switching to reopening plays.

“However, the numbers show that consolidated same store sales growth has become less negative over the past 2 quarters as the high base from 2020 fades and may have turned positive as early as last quarter,” it said.

Abacus noted though that, “the fact is that the grocery chain sells mostly essential items that should be relatively unaffected by inflation. We also believe that higher OFW remittances, lower unemployment and a minimum wage hike later this year will boost consumer spending this year.”