While the local stock market has been on a steady decline - down to its lowest level in nine months -- analysts do not see much relief as investor sentiment has turned bearish due to a confluence of negative factors.
“The local market closed last week at 6,290.27, its lowest close since November 11, 2022’s 6,286.77. The bourse has hit a 9-month low as confidence towards the economy gets strained following the slowdown in our economic growth as seen in the second quarter figures,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that, “adding to this are the clouds hanging over our economic outlook including the mounting food inflationary risks to our country mainly due to El Nino, rallying oil prices, and the Federal Reserve which continues to be in a hawkish stance.”
“Investors face a potentially challenging trading week after the index broke below its 5-month consolidation range and printed its lowest close since November 2022,” said China Bank Capital Corporation Managing Director Juan Paolo Colet.
He added that, “sentiment has turned markedly negative in view of rising US bond yields and growing worries about China’s economic slowdown and risks from its property and shadow banking sectors."
Moreover, many investors are expected to stay cautious as they await news from the Federal Reserve’s annual economic policy symposium at Jackson Hole, Wyoming, later this week.
“All eyes and ears will be on the speech of Fed Chairman Jerome Powell, which investors hope could offer clues on the direction of US monetary policy, particularly whether the narrative is ‘how high will rates go/ or ‘how long will rates remain high,’” said Colet.
Online brokerage 2Tradeasia.com said the Bangko Sentral ng Pilipinas' raising of its long-term inflation expectations due to elevated pressures “mostly drove broader sentiment towards the PSE’s weakest dose so far in 2023.”
It noted though that, “while higher inflation projections hurt value, the BSP's acknowledgment of wildcard factors (El Niño, volatile crude prices, wage hikes) is overdue and inevitable anyway, and should now incentivize fiscal action in the medium-term."
“The market's knee jerk response is not unwarranted, especially in the context of the Fed turning much more hawkish now versus earlier this year, but expect price action to lean on the side of pessimism while this longer hawkish rate cycle plus inflation story is being baked in and digested,” 2Tradeasia.com said.
It added that, “expect funds to prioritize keeping higher liquidity levels for now, as cash is king and global uncertainties keep deployment more challenging. While the PSEi idles in the background waiting for stronger market catalysts, watch out for value plays in their 52-week lows for opportunities to average down.”
Tantiangco said that, “with already four straight week’s of decline, we may see bargain hunting in the market next week. However, the market may still find it hard to stage a strong comeback given the tempered economic confidence. Investors are expected to be on a watch out for catalysts that could help the economy get back to its strong growth momentum.”
For stock picks, both Abacus Securities Corporation and COL Financial have BUY ratings for GT Capital Holdings.
“With the main drivers of net income can be expected to continue to be strong for the balance of the year, our outlook for GTCAP remains positive,” said Abacus.
It added that, “GTCAP’s earnings are way ahead of market expectations, with first half core net income already 76 percent of the full year consensus estimate. Earnings forecast upgrades may be expected over the next few weeks and may provide a lift to the stock price.”
“We are also slightly increasing our FV estimate (for GTCAP) as the higher earnings estimates were offset by higher uncertainty brought about by the recent volatility of the Peso and the elevated inflation and interest rates,” COL said.
It noted that, “nevertheless, we continue to like GTCAP given its attractive portfolio of assets. TMP (Toyota Motors Philippines) continues to benefit from the recovery of its margins while MBT (Metrobank) benefits from the continued growth of its net interest income.”
Abacus also has a BUY rating for International Container Terminal Services Inc. because “valuations are already quite cheap” and “ICT is set to finalize its joint venture with South Africa’s state-owned port operator that will run the Port of Durban, which is expected to add about 1.6 million TEU or an additional 13 percent in volumes on an annual basis.”