Stocks to take cues from inflation, earnings reports

The local stock market will be steered by the release of corporate earnings and the January inflation report this week as investors look for signs on how the Philippine economy will be faring this year.

“This week, investors are expected to take cues from the Philippines’ January consumer price index. The country’s CPI data may have a big impact on this week’s trading as inflation remains a key risk to the local economy’s growth outlook,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted that, “An inflation rate near the upper end of the BSP’s 7.5 percent to 8.3 percent projection may pull the local bourse down, while a print biased to the lower end of the forecast may spur optimism.”

Online brokerage firm said the local January inflation would not only “be crucial in reading the tea leaves for BSP's next rate move (next policy meeting is on Feb. 16) but will also reveal inflation drivers that may persist until the beginning of summer 2023 and may therefore push expectations of consumer confidence recovery later in the year.“

It added that, “Still, the Fed starting to ease back on rate hikes (to 25bps increments from past 50bps) should offer medium-term reprieve, but we maintain our view that equity holders are better off expecting rates to remain elevated than project a pivot over the next 3-6 months as macro indicators have shown little to no evidence that rates should be lowered anytime soon.”

The brokerage also noted that, “This quarter's earnings season should open this week-hopefully with a bang and not a whimper.”

Tantiangco said “investors may also look towards our upcoming labor force survey for clues on the local economy’s health.”

For stock picks, Abacus Securities Corporation has a BUY rating for Universal Robina Corporation as its margins is seen to benefit from easing cost of raw materials while sales and profit growth will be boosted by the reopening of the local and regional economies.

With inflation seen easing in the second semester, URC is also seen to benefit from the resulting growth in discretionary spending due to the nature of its products.

Abacus also has a Buy rating for SM Investment Corporation as its price-to-earnings ratio had recently gone down to its lowest level since early 2012 and is currently still below its 10-year mean.

For 2023, Abacus said it expects SM earnings per share to grow by 15 to 20 percent, driven by retail, banking, and the consolidation of its geothermal power business.