After failing to stay above the 7,100 level, the local stock market is expected to start the Year of the Rabbit by consolidating and building its strength before trying to hop over its resistance level again if the anticipated fourth quarter economic growth report is favorable.

“The local market has already been rallying for the past five weeks driven by optimism towards the local economy’s prospects for 2023,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted though that, “Last week, the local market is seen to be having a hard time getting past its 7,000 - 7,100 resistance range as selling pressures strengthen while new catalysts are yet to be found.” “Only time will tell with full certainty whether the recent rally back to 7,000 has legs or not. The more important question, at least to strong hands, is whether there are catalysts that can be exhausted in the medium-term to fund a jump towards 7,500,” said 2TradeAsia.com.

It noted that, “local equities should be getting some reprieve with normalizing agri commodity prices, at the heels of fiscal intervention via importation. The downside is a higher food import bill year-on-year that exposes the supply chain to dollar risks plus medium-term stress on local agri wages, but will ease inflation expectations for Feb-March.” “This week, the local market may continue to test the 7,000 - 7,100 resistance range. For catalysts, investors may look towards our upcoming fourth quarter and full year 2022 GDP data,” Tantiangco said.

He explained that, “Strong GDP figures may raise expectations that fourth quarter and full year 2022 corporate earnings will also be robust, which in turn may help the market get past its current resistance range.” Tantiangco also warned that, “The recent hawkish signals from the Federal Reserve despite the moderation in the US’ inflation may weigh on sentiment.” “The Fed's first policy meeting for 2023 will be on Jan. 31 to Feb. 1; until then, speculation, and ultimately, volatility should run high as expectations for the Fed's messaging will gyrate over data releases prior to this date,” 2TradeAsia.com said.

It added that, “The upside is with china's reopening (tourism and manufacturing relaxation in Feb. plus lunar new year spending) and favorable dollar versus Asia currency basket.” “Earnings will also return to the forefront over the coming weeks which can help retain January's volume and momentum. This should also prompt some consolidation as discussion of earnings per share, dividends, capital expenditures will naturally separate cruise ships (value plays) from rafts (third liners) that benefited from the recent rising tide,” the brokerage said.

For stocks to invest in, Abacus Securities Corporation has a few as its top picks for 2023 among Power, Banking, Conglomerates, and Consumer companies.

For power, Abacus prefers Aboitiz Power Corporation as it is expected to get a boost from elevated spot prices this year on the back of projected power shortage, as the government anticipates 12 yellow alerts in the Luzon grid from March to November.

BDO is Abacus’ pick among banks as it has one of the highest NIM sensitivity to rate hikes, a dominant market share, and a fairly balanced distribution of its loan portfolio across different segments. The recent stock dividend has also led to greater liquidity for the stock.

SM Investments Corporation is the brokerage’s favorite among conglomerates as it will likely surpass 2022 earnings as the reopening has accelerated much faster than anticipated and this bodes well for SM Retail’s business while profitability for its banking sector should improve given the current environment.

With the easing of raw material prices, Abacus’ top picks from consumer companies are Universal Robina Corporation and D&L Industries as they stand to benefit the most from this trend.

“Apart from that, URC should also see tailwinds in the further recovery of foot traffic (return to office and school snacks) while DNL will see tailwinds in the reopening of China and improving forex rate,” it added.