While the recent market decline has brought share prices to attractive levels which may spark some bargain-hunting, stock market investors are seen to be wary due to the US elections and the release of the October inflation data.
“The local market has exhibited bearish movements in last week’s trading,” said Philstocks Financial Research Manager Japhet Tantiangco who observed that, “Trading participation has weakened while foreign investors have been exiting on the net amid headwinds.”
He noted that, “Following two straight weeks of decline, and with the market still at attractive levels, we may see some bargain hunting next week. However, we may not see a strong ascent yet as the market is still expected to deal with certain headwinds.”
“The Peso’s weakness, now already below 58.00 per US Dollar level, if sustained, is still expected to weigh on the market. Investors are also expected to monitor the upcoming US elections, the results of which will have a big impact on the global economy.
“Investors are also expected to watch out for the Philippines’ October inflation data. An inflation print which falls within the BSP’s 2.0 percent to 2.8 percent, especially one which is biased to the lower end, is expected to give sentiment a boost.
“Finally, investors are expected to continue watching out for third quarter of first nine months corporate results which, so far. has been the source of upward force for the bourse,” said Tantiangco.
For its part, 2TradeAsia.com said “Global marts are expected to hyper-fixate on Western events next week, as guesswork on the US elections conclude just in time for the Fed to deliver what is expected to be its penultimate rate cut for the year.”
“Trade, policy, and growth outlook will be recalibrated post-November, warranting very guarded fund activity over the next few weeks and effectively halting the momentum from the third quarter's rate cuts,” it added.
The stock brokerage advised that, “Staying selective is optimal for returns while broader market events bake and develop. Note that, as holding significant cash is relatively less appealing amid rate adjustments, some shift towards safe havens with neutral risk profiles or income plays that maximize last-quarter-dividends might be viable in the short-term.”
For stock picks, Abacus Securities Corporation has a Buy rating for Union Bank of the Philippines after its third quarter earnings exceeded expectations on the back of continued expansion of its margins owing to the shit in its loan mix more to consumer loans and to its growth current and savings accounts.
“We should see a more pronounced recovery by next year, once provisioning losses (due to Union Digital) are more controlled and the bank is able to bring back its previous pace of loan growth,” it noted.
Meanwhile, COL Financial has Buy ratings for BDO Unibank and East West Banking Corporation, both of which have just released their third quarter and nine-months earnings.
“We believe that BDO, as the largest bank in the Philippines, is well-positioned to capture growth opportunities as the Philippine economy expands by leveraging its wide branch network as well as its connection with the SM group.
“Even as the BSP cuts rates, we think downward pressure on NIM will be offset by changes in the bank’s asset mix as well as the positive impact from the reduction in reserve requirements. We also see potential upside on earnings coming from trading gains as interest rates fall and reduction in provisioning,” it explained.
For EastWest Bank, COL said “We continue to view EW as a value play, given that the stock is trading at just 0.3 times 2024 P/B (price-to-book value ratio). At its current price, EW is also a potential dividend play.”
“Going forward, we are optimistic on the future of the bank’s lending business as the consumer segment continues to drive loan growth and net interest margin expansion.
“As the economy reopened, lending and business transactions have also picked up, leading to a recovery in the bank’s fee income closer to pre- pandemic levels,” it added.