The local stock market is seen to be volatile in the next few weeks while investors wait for the US Federal Reserve meeting at the end of January although general sentiment remains positive amid expectations of rate cuts later this year.
“The first US Fed meeting is scheduled for January 30- 31. Price movements leading into this critical juncture in the first quarter imply that markets have not given up hope yet for the Fed to telegraph earlier-than-expected easing (before midyear 2024),” said 2Tradeasia.com.
It noted that, “we remain skeptical-albeit welcoming-of any surprise easing prior to the third quarter. A gradual ramp-up in expectations is more desirable at the moment, in the face of medium- term volatility in energy prices and geopolitical tensions flaring up in the Middle East and China.”
It added that, “after the Fed's first meeting, the BSP (Bangko Sentral ng Pilipinas) will not make a scheduled policy move until its first MB (Monetary Board) meeting on February 15. Expect for elevated volatility in between, especially as Philippine inflation for January, which is more sensitive to energy and forex variability relative to regional peers, will be released in the interim.”
The stock brokerage said though that, “potential rate cuts later this year, plus renewed US economic activity (bumped by Presidential Elections in November) should help markets get a lift and sustain the current excitable state.”
It concluded that, “the market failed to revisit 6,700 level, and is currently retesting 6,500. Nothing short of expected as the 3-month long rally has to pull back and take pauses to reaffirm its legs. The goal is to stay in the marathon for more exciting impetus expected in the second half of the year.”
For stock picks, Abacus Securities Corporation has upgraded its growth estimates for GT Capital Holdings advising clients to “stay overweight on GTCAP because it still has a lot of catching up to do,” noting that “the stock is down 22 percent since January 2020.”
It added that, GTCAP’s earnings and valuations will get a boost from Toyota Motors Philippines as most replacements or upgrades of private vehicles have been pushed back to 2024 and 2025 due to low mileage during the pandemic years.
Abacus said it is also more optimistic with Aboitiz Equity Ventures as it is seen to get a boost from its infrastructure businesses, namely the Mactan Cebu International Airport due to higher stake and revenge travel, ramping up of output of Apo Agua bulk water supply in Davao, and the further expansion of its cell tower portfolio. The acquisition of Coke is also seen to add to earnings.
The brokerage is also recommending Manila Water as the stock is becoming cheaper because its share price has been declining while its projected earnings per share is climbing.
Meanwhile, Meralco is among COL Financial’s top picks “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.