The local stock market may see some bouts of bargain-hunting especially with US stocks up over the weekend after US Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole.
However, analysts note that investor sentiment remains weak due to discouraging prospects of the local economy. US macroeconomic figures to be released this week will also provide some cues for the market.
“We may see episodes of bargain hunting given the local market’s current position,” said Philstocks Financial Research Manager Japhet Tantiangco noting that, “the local market has already been declining for five straight weeks with a loss of 7.33 percent.”
He added though that, “we may not see a strong rally yet as confidence towards the economy is weighed by mounting inflationary risks and a tempered outlook.”
“Adding to this is the hawkish stance of Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium wherein he said that the US’ inflation remains high and that the Fed is prepared to tighten further,” Tangtiangco said.
He said, “investors may also look for more clues on the local economy including the S&P Global Philippines Manufacturing PMI.”
Meanwhile, 2Tradeasia.com said “volatility is expected abroad, as key US data will be released- particularly, on employment and manufacturing. These are crucial inputs to the US Fed's move on the next FOMC (Sept. 19 to 20).”
It noted that, “consensus seems to be looking at a potential pause, but possible November and December rate hikes are getting traction and are gradually being priced in yields.”
“Expect local sentiment to track headlines on this next week, amid dearth of new leads at home,” 2Tradeasia.com said.
It explained that, “the recent breakdown only confirms that sentiment is hyper-fixating on macro challenges that have unfurled in the past couple of weeks. The BSP projecting a GDP miss while increasing inflation expectations in the medium- to long-term, have reinforced anxieties of the yesteryears.”
“The ongoing Ghost month plus the recent FTSE rebalancing further doubled gown on these market fears… The shortened trading week can further sap already anemic participation. We strongly encourage looking at individual corporate stories while the broader market contemplates direction. The slide has made particular valuations only more appealing, especially relative to the downside risk of holding in the long-term,” it added.
For stock picks, COL Financial has started coverage on online gaming firm DigiPlus Interactive Corporation (PLUS) with a BUY rating “given the rapid growth potential of its online gaming operations in Bingo Plus.”
“The company also has the financial muscle to capitalize on the attractive growth prospects of the industry given its large growing operating cash flow and strong balance sheet,” it added.
COL also has a BUY rating on Jollibee Foods Corporaiton as it expects “continued growth, underpinned by its leading position in the Philippines. As for the international front, improvements in profitability could be expected to ease the drag on earnings moving forward.”
It also has a BUY rating on Cebu Air as it is positioned to benefit from the reopening of the economy and recovery of travel.
“Key risks, however, include fuel price volatility amid OPEC+ production cuts, sharp depreciation of the peso, and larger-than-expected number of aircraft grounded amid the Pratt and Whitney issue,” the brokerage noted.
Meanwhile, COL has a BUY rating for property firm Ayala Land, Megaworld, Robinsons Land, and SM Prime as residential, mall, and tourism revenues continued to recover.
“Hotel revenues on average grew 53.7 percent year-on-year in the second quarter of 2023 as return to normalcy resulted in a resurgence in local travel and return of MICE (meetings, incentives, conferences, exhibitions) activities,” said COL.
It noted that, “occupancy rates and average room rates for hotels, resorts, and conventions centers were higher than the same period last year. Outlook for the hotel and resorts sector continues to improve as domestic tourism momentum is sustained and international travel picks up.”
Abacus Securities Corporation also pointed out that “tourist arrivals jumped in July to 516 thousand, up 75 percent YoY and the highest monthly total since January 2020. Year-to-date, the country has received 3.22 million, 190 percent higher versus last year.”
“This feat become more impressive given the recent controversy surrounding the rebranding of the Philippines' tourism slogan and because the 2019 figure was bloated by the back and forth of Chinese POGO workers. It is a bright spot that bodes well for the biggest hotel operators, RLC, MEG and ALI,” said Abacus.