The local stock market will be watching out mainly for the March inflation rate figure which will be announced by the government on Tuesday.

“Next week, inflation is expected to be one of the main themes in the local market. Our March consumer price index data is set to be released with the inflation figure expected to be higher than February’s. This may cause a negative reaction in the bourse,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.

Online brokerage 2TradeAsiacom also said that, “forecasts are erred towards the downside given the biting impact crude's volatility has provided over the past month.” “As the Russia-Ukraine tiff continues, the conservative approach would be to assume that higher crude prices will be protracted for at least the first half of 2022,” it added.

However, Tantiangco said “The market could still end the week on a positive note if the cooldown in global oil prices would be sustained which in turn would ease inflation expectations.”

“Confidence towards our local economic recovery supported by the sustained control over our Covid-19 situation, and the recently released February bank lending and March S&P Global Philippines Manufacturing PMI may also help the market (this) week,” he added.

Tantiangco said that, “(This) week, investors may also take cues from our upcoming February labor market and foreign trade data.” Aside from inflation, 2TradeAsia.com also pointed out that the market may be weighed down after the 2-year and 10-year US Treasury yield cures inverted for the first time since 2019.

“This event is a well-known augur of recession, reflecting investor pessimism in the long-term versus the near-term. Note that not all inversions preceded a recession, only that confidence in economic expansion has gone significantly lower,” it explained.

The brokerage also said that, “Additionally, inversion's strength as a predictor is impaired by this year's extraordinary variables that affect risk-return profiles in the first place, namely record-level inflation in the first quarter of 2022 and fresh rounds of quantitative easing on the Fed's end.”

With inflation seen to rise, 2TradeAsia.com said investors’ strategy “may be shifted from simply avoiding stocks with crude exposure towards those that are better at passing on the inflation burden and growing their topline at a faster clip.

“Renewables and, to a certain extent, banks are particularly ticking these boxes for the second quarter,” it advised.

The firm also advised investors to “Spot for good entries in sectors that benefit from an election-charged, summer-laden second quarter.” Meanwhile, COL Financial is maintaining its BUY rating on D&L Industries despite rising inflation “as we continue to like D&L given its diversified portfolio of products catering to different consumer groups.”

“The company is relatively resilient to rising input costs thanks to its large portfolio of high margin specialty products. D&L is also a beneficiary of the growing popularity of health, wellness, and sanitation trends brought about by the pandemic,” it added.

Abacus Securities Corporation is also advising clients to switch from other consumer stocks to D&L as “it is better positioned to pass on costs and it has shown to continue growing volumes despite higher prices. Demand is also expected to continue to recover as the economy opens up and that should also drive volume.”

COL also has a BUY rating on GT Capital “as it stands to benefit from the expected recovery of the Philippine economy.” At its current price, it is also trading significantly below its historical average.

Abacus also rates GT Capital a Buy as it is still trading at a wide discount to its net asset value even with lowered target multiples for Toyota.

COL also has a BUY rating on First Philippine Holdings Corporation because, given its 68 percent ownership in First Gen, “We view FPH as a cheaper way to own FGEN.”