The local stock market may continue to get a boost from growing optimism that monetary authorities will soon stop raising rates with possible reduction later in the year as inflation seems to be cooling down.
“This week, hopes of a soon pause in the monetary tightening of the Federal Reserve and the Bangko Sentral ng Pilipinas may help the local bourse,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that, “The optimistic consumer confidence towards the next 12 months based on the BSP’s survey may also boost market sentiment.”
“The BSP chief expressing support for a possible rate hike pause—and even rate cuts if inflation permits—coincided with the IMF's latest upgrade in PH growth outlook, from 5 percent to 6 percent in 2023,” said 2TradeAsia.com.
It added that, “the slight upgrade came despite an overall downgrade in medium-term global outlook (only 2.8 percent growth in 2023, and 3 percent in 2024), which should reinstate some confidence in local fundamentals relative to the rest of the world.”
However, Tantiangco warned that, “fears of a possible recession in the US and its impact on the global economy may weigh on the market. Investors may also watch out for our upcoming OFW cash remittance data and Balance of Payment position for clues on the local economy.”
“The market is trading below its 10-day, 20-day, 50-day, and 200-day exponential moving averages. Finally, its 50-day and 200-day EMAs have already formed a Death Cross. Overall, the local market’s chart is reflecting bearishness as investors maintain a cautious stance amid the lingering headwinds,” he added.
On a positive note, Tantiangco said “the local bourse is trading at a PE (price to earnings) ratio of 14.14 times, below its 5-year historical average of 19.08 times, implying that it is at attractive levels. With this, we may see episodes of bargain hunting that would provide support to the market.”
“As more (positive) headlines permeate sentiment, expect some lift in participation, especially as the market approaches first quarter earnings reporting season. Amid this era of slower—but still positive—macro growth and higher financial risks, smart but stricter allocations to specific sectors or growth stories are preferred to generate excess returns. Accumulate in these niches,” said 2TradeAsia.com.
For stock picks, Abacus Securities Corporation said Alliance Global Group Inc. “is probably a good stock to own for 2023” because all of its businesses are “positioned to improve this year and the current consensus estimate for 2023 appears to be realistic which means the stock is trading below 6 times earnings.”
“Another positive for AGI is that it rivals its much bigger peer, SM Investments, as being the most consumer-centric conglomerate (among the liquid ones, at least),” it added.
The brokerage also favors SM because, “For a stock which we believe is among the best positioned to benefit from long term positive consumer trends, it is a great time to buy or add.”
“We believe its first quarter profit will again surprise to the upside even after consensus earnings per share has risen by 7 percent since the start of the year. This means the stock is even cheaper than it appears,” Abacus noted.
It added that, “Finally, investors should note that SM is trading at its smallest premium relative to the PSEi since late 2015 or early 2016.”
Meanwhile, COL Financial has a BUY rating on First Gen Corporation because “We continue like FGEN given its relatively stable cash flow since bulk of its capacity is contracted.”
“Furthermore, with the Department of Energy’s moratorium on new coal power plants, this could potentially push forward the projected power shortage beginning in 2024, increase in the competitiveness of FGEN’s gas and renewables plants, and improve the feasibility of FGEN’s LNG regasification project which will enable its gas plants to remain viable after the depletion of the Malampaya gas field,” it explained.