The local stock market’s performance this week will depend primarily on the US Federal Reserve meeting and corporate earnings reports, as well as the President’s State of the Nation Address.
“The local market appears to be building momentum as it formed a higher low last week and even closed higher compared to the preceding week,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted though that, “Trading participation was tepid, however, with value turnover low implying that the market’s movement still has weak conviction.”
“The market looks poised to test the multi-month resistance at 6,750 after last week’s bullish consolidation aided by net foreign buying,” said China Bank Capital Managing Director Juan Paolo Colet.
But, he said “Whether there is a strong catalyst for a range breakout, however, depends on this week’s major news flows.”
“Hopes that the Philippine corporate sector’s second quarter results have been strong may help keep the market afloat. Next week, the Federal Reserve’s policy decision may take center stage, however,” said Tantiangco.
He explained that, “If the Fed keeps its policy rate unchanged, it may push the local market higher. If the Fed raises their policy rates however, then it may put downward pressure on the bourse.”
“Brace for volatile swings on the macro front, as the US Fed will hold its 2-day meeting this week (July 25 to 26), settling a very polarized market, at least as to whether or not the broader economy 'needs' more rate hikes,” said 2Tradeasia.com.
It added that, “Consensus and yields both are inclined towards another 25bps rate hike next week, although history has shown the Fed can surprise markets by -25 bps.”
Colet said the SONA is likely to set the trading tone for the start of the week as market participants digest the President’s economic agenda. Second-quarter corporate earnings releases are also expected to affect risk sentiment.
“But it is the Federal Reserve’s policy rate announcement and interest outlook that we see as potentially having the most impact on our index. A signal from the Fed that its rate hike campaign is in the final phase, or a shift to less hawkishness, could trigger a long-awaited breakout rally,” he stressed.
For second quarter earnings, 2Tradeasia.com said Wilcon Depot will be hosting a briefing this week noting that, “corporate outlook for the second half of 2023 will likely drive more price movement than actual second quarter results, owing to less visible catalysts in the medium-term.”
For stock picks, Abacus Securities Corporation is recommending ICTSI to investors after the firm won the bid to operate the Port of Durban which is the main gateway to South Africa.
With this, the brokerage said “ICTSI’s total throughput next year should increase by around 13 percent,” adding that, “we see possible synergies with the firm’s Madagascar (port).”
“On balance, we therefore think that this will be a potentially strong driver for ICTSI,” Abacus said.
Meanwhile, COL Financial has a BUY rating on ACEN “given the rapid growth of its power generation portfolio and its focus on renewable energy.”
“From 4,177MW currently, the company aims to increase its capacity by 62 percent with its 2,500MW of projects under construction which are expected to be completed by 2025,” COL said.