The local stock market will be looking for cues from fresh corporate earnings reports and the US inflation data this week, even as some profit-taking is expected after the recent rally fueled by the low inflation rate and expectations of rate cuts later this year.
“The local market continues to exhibit a bullish bias in its movements,” said Philstocks Financial Research Manager Japhet Tantiangco, noting that foreign investors have been supporting the rise while value turnover has risen, “implying that conviction in the market’s is building up.”
However, he said the local market may still retest the 6,700 to 6,800 range this week as, “with already 3 straight weeks of rising, we may see strong selling pressures next week driven by profit taking.”
“On the positive note, the favorable economic data we’ve recently seen including the slowdown in inflation last January and the strong December labor force survey results may help in sustaining the positive sentiment within the market,” Tantiangco said.
He added that “Wall Street’s rally, if sustained, may also continue to provide positive spillovers to the local bourse. Still, investors are expected to look for further catalysts that would add reasons to the optimism. Primarily, investors are expected to look forward to our fourth quarter 2023 corporate results.”
“The market has had a good run so far but will face increased pressure to consolidate below the psychological resistance at 7,000,” said China Bank Capital Corporation Managing Director Juan Paolo Colet.
He noted that “this week's key events that will influence overall market direction are the release of US January consumer price index data and the outcome of the BSP monetary policy meeting.”
“The BSP is very likely to keep its policy rate unchanged while maintaining a hawkish tone in view of upside risks to domestic inflation. Given that many market participants do not expect the BSP to cut rates ahead of the US Federal Reserve, investors will pay close attention to how this week's US inflation print will feed into the timing of a dovish shift in US monetary policy,” Colet explained.
Meanwhile, 2Tradeasia.com said, “a run towards 7,000 in the short-term will be on the back of more active trading volumes and positive fourth quarter earnings and first half 2024 outlook over (this) weeks' earnings calls.”
“That being said, the end game is long-term growth on the back of what could possibly be the best year in terms of earnings quality since 2019. Buy,” the brokerage said.
Abacus Securities Corporation said the market could also be influenced by the announcement of the result of the MSCI February Index Review early Tuesday this week although this will likely affect only stocks moving in and out of the MSCI indices.
“Implementation date will be on March 1 so that the last day to trade on the official changes will be on Leap Day, February 29,” it added.
For stock picks, COL Financial has a Buy rating for Manila Water because, following its strong performance in 2023, MWC is expected to continue its growth this year as it implements the second tranche of its rate rebasing adjustments.
This is on top of the steady growth in billed volumes as the commercial and industrial segment continue to recover closer to pre-pandemic levels.
“We like MWC given its improved regulatory footing, highlighted by the extension of its legislative franchise to 2047 and the successful rate rebasing exercise in 2022. The strong operating performance also allows MWC to give out high dividends going forward,” COL said.
The brokerage also favors Robinsons Retail despite its flat operating profits in the fourth quarter of 2023.
“We continue to like the company given its well-diversified portfolio of retail formats in the staples and consumer discretionary categories. We also expect RRHI to benefit from improving mobility trends in malls and pent-up demand for its discretionary formats,” it added.