The local stock market will try to breach its resistance level this week on the back of the rate hike pause although investors will be looking to the US for cues coming from its debt ceiling issue and the release of macro-economic data led by its GDP numbers.
“Once again the local bourse is showing positive momentum, breaking above the 6,600 level as well as its 10-day, 50-day, and 200-day exponential moving averages. However, value turnover remains thin implying tepid conviction in the market,” said Philstocks Financial Research Manager Japhet Tantiangco.
Online brokerage 2Tradeasia.com noted that, “The PSEi moving at a tight band in the 6,400 - 6,700 range for most of the second hints at possible price breakthroughs. While, technically, the break could go either direction, strong positive catalysts can potentially propel the index closer to 7,000 in the medium-term.”
China Bank Capital Managing Director Juan Paolo Colet also said “The index is poised to make another attempt to break the 6,700 to 6,750 resistance zone” but added that, “we expect profit-taking to put pressure on any rally.”
“Last week’s positive momentum could encourage investors to push prices higher, but the local market’s direction will depend largely on developments in the US, particularly the progress of debt ceiling talks and views on the Federal Reserve’s next policy steps,
“In the near term, a timely resolution of the US debt limit could be a strong catalyst for bullish action,” he said.
“Next week, we may see positive sentiment in the local market driven by the Bangko Sentral ng Pilipinas’ pausing of their monetary tightening and the trimming of their 2023 inflation forecast,
“Investors are expected to maintain caution however while monitoring the developments on the US’ debt ceiling negotiations. An agreement reached by the US government on their debt ceiling concerns may provide a boost to the local market,” noted Tantiangco.
2Tradeasia.com said “US GDP, factory data, and labor data will be highlighted next weeks, as watchers continue to closely monitor macro indicators to gauge whether recent monetary policy actions by the Fed have legs to stand on.”
It added that, “Status quo on domestic benchmark rates, while welcome, confirms that Philippine inflation does not strike confidence yet. We reaffirm this view; note that last year's CPI has been bloated by elevated consumption activity centered around the 2022 elections, which might skew the year-on-year inflation comparisons off.”
For stock picks, Abacus Securities Corporation likes SSI Group which started the year strong with its highest first quarter numbers ever.
“SSI has become one of the hottest stocks this year and yet, it remains cheap with its price-to-earnings trading around 4 times,” it noted.
COL Financial has a buy rating on GT Capital as it stands to benefit from the continued strength of the local economy. A stabilizing peso should also benefit GTCAP as it allows Toyota Motor’s margins to recover.
At its current price, it is trading at just six times 2023 earnings, significantly below its historical average price-to-earnings of 12 times. Current discount to net asset value (NAV) also remains near historical high at 53 percent.
COL also has a BUY rating on Alliance Global Group as “shares are currently very undervalued. It is trading at a steep 31.65 percent discount to our fair value estimate, which is based on a 25 percent discount to our NAV estimate of P26.96.
“In addition to cheap valuations, AGI, through all its subsidiaries, is positionedl capitalize on the resumption of economic growth.”
COL also has a BUY rating on First Gen “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.”