Investors in the local stock market will be watching out for the September inflation numbers on Oct. 5 after its strong performance last week.
“Despite last week’s rally, the local market remains at attractive levels as its price to earnings ratio as of September 29 is at 13.61 times, below its 2018 to 2022 average of 19.08 times,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that, “as to whether the bargain hunting will continue next week may depend on the upcoming data” adding that the September inflation data will give clues on the Philippines’ consumer price situation as well as on the Bangko Sentral ng Pilipinas' (BSP) policy outlook.
“An inflation print significantly higher than August’s 5.3 percent, particularly one which is near or exceeds the upper end of the BSP’s 5.3 percent to 6.1 percent forecast may cause the market to decline due to the negative implications on our economic performance and the resulting possibility of the BSP tightening further,” said Tantiangco.
Online brokerage 2Tradeasia.com said, “this month's CPI will follow July's 4.7 percent and August's 5.3 percent--this implies September will confirm an uptrend, which is very likely given the BSP's projected band of 5.8 percent for the year.”
“As mentioned in our recent notes, inflation risk is still tilted to the downside given persistent supply shocks, energy and transport costs, and seasonal demand-pull inflation. Base-case hikes on the November and December meetings of 25bps each will put the policy rate to 6.75 percent by the end of 2023; while this explains the observable lack of excitement on the ground, better for investors to price this off now, especially as the PSEI rebalancing has made the index more cyclical and consumer-weighted,” it added.
Tantiangco said, “investors are also expected to watch out for the upcoming S&P Global Philippines Manufacturing PMI and labor market data for clues on the health of the local economy.”
“Offshore, investors are expected to take cues from the developments in the US government, particularly their budget issue. If a US government shutdown happens amid the lack of a budget agreement, it may weigh on market sentiment,” Tantiangco said.
Meanwhile, 2Tradeasia.com said that, “with August and September--the two historically weakest months for local equities--already in the rear view there should be some silver lining for momentum followers, after the PSEi bounced from the 6,000 psychological support level. Expect the continued shuffling in the PSEi to drive activity in the near-term.”
While AboitizPower was removed from the PSEi in the latest rebalancing, both Abacus Securities Corporation and COL Financial are still rating the firm’s stock a BUY.
Abacus said the recent drop in AP’s share price due to its removal from the index presents a buying opportunity as its share price is now just 7.5 times it earnings per share even though its fundamentals remain intact.
“Although disappointing, AP removal from the index will have no impact on its profitability and earnings outlook. In fact, we recently upgraded our fair value estimate on AP to P50.00 per share after factoring in the contribution of new renewable energy plants that will be completed up to 2026, increasing the company’s attributable capacity by around 20 percent,” said COL Financial.
It also noted that, “given the size of its market capitalization, AP can also be easily added back to the index if it eventually decides to sell some of its treasury shares to actively managed funds that want to can capitalize on the company’s improving fundamentals.”
Meanwhile, COL is also recommending a BUY on Nickel Asia which replaced Union Bank of the Philippines in the index.
“We continue to like NIKL as we remain positive on the long-term outlook for nickel due to the rising EV battery demand. Furthermore, we believe that NIKL’s expansion of its RE power generation business comes at an opportune time given the strong cash flow generation of its nickel mining business, as well as the tightening of power supply in the country,” it explained.