The local stock market is expected to be swayed by the release of the US June inflation report this week which will again give a clue as to how the US Federal Reserve will act on interest rates.
“This week’s market performance will be largely influenced by investors’ anticipation of and reaction to US June inflation data,” said China Bank Capital Managing Director Juan Paolo Colet.
He noted that, “many traders remain on edge about the increasingly hawkish policy stance of the Federal Reserve, and this week’s inflation print could affect the outlook for further US rate hikes. This might also impact the BSP’s view on the appropriate timing of any domestic rate cut.”
“With the market still at attractive levels, we expect episodes of bargain hunting to occur next week. However, worries over a possible resumption of the Federal Reserve’s monetary tightening may still weigh on investors’ sentiment,” said Philstocks Financial Research Manager Japhet Tantiangco.
He added that, “further rate hikes by the Fed puts downside risks on the US and the global economy. Investors are also expected to wait for catalysts that could strengthen market confidence. As they wait, trading participation could remain tepid.”
Online brokerage firm 2Tradeasia.com said “upcoming US inflation report and unemployment claims should help form the picture for (the Fed’s July 25) meeting, but movements in safe haven assets and short-term treasuries suggest a potential 25 basis point hike this July, plus another round in the September 19-20 FOMC.”
“The local inflation coming in slower at 5.4 percent… strengthens the case for another status quo on the BSP's end (next Monetary Board meeting on August). This view is our base case for now, but outcome will very much be hinged on the Fed not surprising with a 50+ bps hike this July (the BSP is not fully decoupled with the Fed),” it added.
“The market started the second semester underwhelming, plagued by old uncertainties and lack of fresh leads. Our sector selective strategy is sustained, ahead of MSCI rebalancing and annual ‘Ghost Festival’ in August,” said 2Tradeasia.com.
For stock picks, Philstocks is advising investors to buy COSCO on pullbacks after the firm doubled its capital expenditures budget to P12.2 billion this year. It recommended investors to buy the shares close to its support level which is pegged at P4.80 per share.
Meanwhile, Regina Capital Development Corporation rates SM Prime Holdings a BUY as its first quarter performance showed a strong recovery in its mall, hotels and commercial segments.
“With the low base effects, SMPH saw a high double-digit growth in its mall division. As the biggest mall operator in the country, the Sy-led property firm was able to mirror the strong recovery in economic activity as foot traffic further increased,” it noted.
RCDC said that, “what added to SMPH’s surge in earnings, in addition, was its full collection of rental fees during the quarter.”
“Moreover, the hotels and convention centers business lines of the group delivered a triple-digit growth on the resurgence of demand in travel,” it added.