This week, the stock market could still benefit from positive sentiment due to prospects of rate cuts next year although last week’s rally may result in some profit-taking prior to the long Christmas weekend.
“The policy easing prospects of the Federal Reserve may still provide support to the local bourse. However, we advise caution as the market’s steep rally last week opens the possibility of profit taking,” said Philstocks Financial Research Manager Japhet Tantiangco.
He added that, “investors may also digest the results of the BSP’s latest consumer and business confidence surveys which have reflected less upbeat results with respect to sentiment on the economy’s future."
“Finally, the BSP’s still tight policy outlook may weigh on sentiment. Given these, the market could move sideways next week,” he said.
Online brokerage firm 2Tradeasia.com advises investors to take advantage of rallies to make quick profit off short-term trades as markets hyper-fixated on interest rate cycle shifts tend to gyrate heavily in tandem with macro headlines.
However, it noted that investors should “not lose sight of 2024, which is shaping up to be a year with more meaningful and impactful recovery. Accumulate.”
The brokerage said the Bangko Sentral ng Pilipinas' decision to maintain rates and its positive outlook for next year “should only support our overweight case for local equities.”
“In fact, the argument in favor of equities further strengthen considering stocks historically generate superior returns in case of a blue-sky scenario, such as a definitive end in the rate hike cycle, and currently depressed valuations imply a low floor for risk, especially relative to bonds and alternative assets that have outperformed this year,” it added.
For stock picks, Abacus Securities Corporation said Manila Water Company is a steal at current levels specially since “tariff and other regulatory issues appear to be a thing of the past.”
With the recent tariff hike approved by regulators, Abacus said “we expect that 2024 earnings will beat the current consensus by a significant margin despite the odds that El Niño will strengthen in the summer months.”
It noted that, “MWC is even cheaper than it looks even though it is already trading at its lowest forward price-to-earnings ratio ever.”
Abacus has also upgraded its recommendation for Ayala Land Inc. to Buy from Trading Buy because it will benefit from a cut in interest rates next year while the stock enjoys high foreign buying interest.