With last week’s trading at the stock market swayed by inflation data that gave clues on US interest rate movements, investors this week will get to actually see what the US Federal Reserve will do in reaction to this data.
“The policy meetings of the Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) are expected to take the center stage,” said Philstocks Financial Research Manager Japhet Tantiangco said.
The US Federal Open Market Committee will have a policy rate meeting on Sept. 19-20, while the BSP's Monetary Board will meet on Sept. 21 to discuss its own key rates.
Tantiangco said that, “hopes that both the Fed and the BSP will keep their policy rates unchanged may somehow give market sentiment a boost. Investors are also expected to watch out for clues on the policy outlook of both central banks.”
“Dovish signals are seen to lift the market while hawkish signals may pull the market down. Investors may also take cues from the BSP’s upcoming Business and Consumer Expectations Surveys,” he added.
Online brokerage firm 2Tradeasia.com also said “focus will once again be trained on the US Fed's next policy meeting on the 20th, amid the flurry of economic data and speculation from capital markets since late August.”
“Consensus is expecting a status quo on rates next week, given supportive jobs data last month and more fuel and energy driven inflation (despite U.S CPI printing hotter than expected for August at 3.7 percent),” it added.
The brokerage said, “the BSP will also hold its monetary board meeting in (this) week, with an arguably trickier balancing act in the very short-term given the sudden inflation uptick in August.”
“The BSP is expected to move parallel to the Fed; as implied by recent headlines, the BSP is expecting inflationary pressures to moderate by the first quarter of 2024, which is slightly more dovish than our baseline expectations," it added.
“Tailwinds that support this dovishness include supply shocks dissipating by the fourth quarter, but the market may need more convincing in this regard, being heavily weighted in cyclicals (at least 44 percent of PSEI basket),” 2Tradeasia.com said.
For this week, it advised investors to “expect lingering selling pressure from the Ghost month festival and seasonally weak consumer activity in August-September, but more positive outlook from central banks should help the market transition to base building towards a historically more successful November-December-January season.”
For stock picks, Abacus Securities Corporation recommends investors to be overweight on GT Capital Holdings because of the growth in sales of subsidiary Toyota Motors Philippines for the first eight months of 2023.
“The key will be if TMP can sustain the improved margins from the second quarter which we this is possible. This keeps us OW (overweight) on GTCAP,” it noted.
Meanwhile, COL Financial is rating Aboitiz Power a BUY after increasing the firm’s earnings estimates. AP’s power generation capacity is once again expected to ramp up beginning the second half of 2023 with its renewable energy capacity expansion initiative.
From the second half of 2023 until the end of 2026, a total of 962MW of attributable capacity is expected to be added to AP’s power generation portfolio, equivalent to about 20 percent of AP’s existing attributable capacity.
“We like AP as we believe that the earnings recovery from 2021 to 2022 can be sustained this year with overall power demand expected to remain strong. Furthermore, valuation is also cheap,” the brokerage said.
COL is also recommending East West Bank after raising its earnings forecast following stronger-than-expected first half results.
“Despite the recent rally in its share price, we continue to view EW as a value play… At its current price, EW is also a potential dividend play,” it noted.
COL also said that, “going forward, we are optimistic on the future of the bank’s lending business as the consumer segment continues to drive loan growth and as net interest margin continues to expand. Lending and business transactions have also picked up as the economy reopened, leading to a recovery in the bank’s fee income closer to pre-pandemic levels.”