While the PSEi is still on a bullish trend, share prices may be weighed down this week by weaker sentiment due to the higher-than-expected US inflation rate which may delay expected rate cuts.
“Technicals remain bullishly biased with its 50-day exponential moving average about to cross its 200-day counterpart. If this continues, it will form a Golden Cross which signals a possible further rise of the market,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that, “Despite the market’s ascent, it remains at attractive levels with a price-to-earnings ratio of 13.67 times, below its 2019 - 2023 average of 18.15 times.”
“However, investors are expected to watch out for positive catalysts. Without such, sustaining the market’s climb next week could be difficult. Meanwhile, the dampened Federal Reserve rate cut hopes following the US’ December 2023 inflation print, and worries over the tensions in the Middle East may weigh on sentiment,” Tantiangco warned.
Online brokerage 2Tradeasia.com said that, while the unfavorable US inflation print “will counter pro-rate cut camps who have been advocating for major easing this year, the decline in core CPI for December from 4 percent to 3.9 percent-which excludes food & energy volatility in the inflation measure-should still support the overall equities-friendly direction of monetary policy, at least in the context of sustained falling inflation.”
“While more confident, market participants remain highly sensitive on inflation and interest rate related forces. A more growth-oriented strategy relative to 2022 and 2023 is highlighted given this inflection in market confidence, switching for higher earnings potential plus expansion stories in line with capital costs being more accessible,” it added.
The online stock brokerage firm noted that, “Lack of trading volume notwithstanding, the PSEi is building a clearer technical runway towards 6,800, making a trip to 7,000 not too lofty of a goal in the medium-term.
“In the short-term, improving macro factors plus confirmation of earnings should lubricate the ascent and provide opportunities to day range trade. In the long-term, invest in theme: global easing coinciding with very low local valuations despite positive free cash flow.”
Meanwhile, COL Financial is listing Aboitiz Power Corporation and Manila Electric Company among its top stock picks for 2024.
“Given our view of a balanced supply-demand power market in 2024, we favor power companies with high level of contracted capacity such as AP and MER as their earnings will be the most resilient in the sector,” COL said.
It noted that, “We like AP because of its resilient cash flow and excellent earnings visibility. Although we expect profits to decline by 11.8 percent in 2024 due to the start of the recognition of depreciation and interest expenses of the Dinginin Coal Plants, longer term earnings growth outlook has improved following the ramp up of its renewable energy capacity expansion initiative.”
“We also like MER given its predictable and stable cash flow from its power distribution business. Although we forecast MER’s profits to decline by 18 percent in 2024 as the profits of Pacific Light normalizes, we continue to like MER as its profitability is least vulnerable to the risks facing the power industry (volatility in WESM and commodity prices and unplanned outages) because bulk of its profits come from the distribution business,” COL said.
Meanwhile, Abacus Securities Corporation advises investors to accumulate shares of D&L Industries as the draft circular by the Department of Energy has already suggested the increase in biodiesel blend will happen every year in increments of 1 percent until 2026.
“This should be beneficial for DNL. If implemented, the first increase will happen in July 2024 that will be accretive for DNL right away. DNL’s share price performance did see an improvement after this was announced but remains to be depressed compared to where it was this time last year caused by the weaker sales volumes.
“We remain bullish on DNL's long term prospects especially on its expansion plant that is expected to ramp up utilization this year and the years ahead,” said Abacus.