The local stock market is seen to open the week with some bargain-hunting following last week’s steep drop although investors will also be taking cues from the release of the Philippines’ second quarter economic growth data as well as the US July inflation numbers.
“Given the steep decline last week, we may see some bargain hunting that would help the local market edge higher,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted though that, “any advancement would be challenging as headwinds weigh on sentiment. Aside from the renewed worries over the US economy, upside inflationary risks are also building up for the Philippines which may cause worries over our near term inflation outlook.”
“This includes the mounting risks to food including the impact of the recent typhoons, India’s banning of its non-basmati white rice exports, and El Nino. It also includes the rising international oil prices,” he added.
China Bank Capital Corporation Managing Director Juan Paolo Colet said that, “after its largest weekly loss since September 2022, the market may see volatile trading this week.”
He also noted that, “the steep selloff last Friday, induced mainly by institutional trades for the PSEi rebalancing, could prompt an index rebound on Monday.”
“Activity for the rest of the week will be driven by Philippine second quarter GDP and US July inflation prints, corporate earnings reports, and the MSCI index review announcement,” Colet added.
Online brokerage firm 2Tradeasia.com said “fundamentals seem to remain intact, especially for our monitored sectors--we remain positive that this quarter's 'shrugged-off’ earnings strength will eventually be priced in. If anything, the recent slide has made valuations come off more attractive for particular stocks that have posted better second figures.”
“The drop back to 6,450 might seem unencouraging, but lack of volume implies some of the profit-taking might be an early reaction ahead of the MSCI rebalancing, instead of a deep erosion in fundamentals,” it added.
For stock picks, Abacus has a “Trading Buy” rating for ACEN as it share price is just eight percent above its 52-week low and has been on a downtrend since October 2021.
“As we expect second half earnings to catch up due to the ramp up in capacity, we thus expect the stock to react favorably over the medium term,” it added.
COL Financial also has a BUY rating for ACEN “given the rapid growth of its power generation portfolio and its focus on renewable energy.”
The online brokerage firm also has a BUY rating for BDO. “We are revising our estimates following BDO’s better-than-expected results in the first half of 2023… As a result of higher profitability assumptions, we are upgrading our FV estimate,” it said.
“We continue to like the bank as we expect it to be one of the major beneficiaries of the continued growth of the economy with its liquid balance sheet and wide branch network. With its strong deposit franchise, the branch is also well-positioned to capitalize on opportunities in the elevated interest rate environment,” COL said.
Abacus noted that BDO “observed that competition is becoming less intense compared to a few months ago. This, and a potentially more stable interest rate environment from the BSP’s pause in its rate hike cycle, may lead to a slight improvement in loan growth that is expected to reach up to 10 percent for the full year.”
“The bank also expects net interest margins to continue to expand up to the fourth quarter of 2023 or even first quarter of 2024, although at slower pace than in previous quarters. This should keep earnings performance robust through the rest of the year,” it added.
Abacus said “a small boost from lower provisioning is also possible, as non-performing loan cover is already high and NPL formation remains benign.”