After the PSEi broke its 7-week rally while failing to breach the 7,000 resistance level, the local stock market is seen to wait for fresh cues from the Federal Reserves meeting this week (March 19-20).

“Last week’s drop opens doors for bargain hunting opportunities. However, a strong rally could be difficult amid tempered hopes of a soon rate cut by the Federal Reserve following the above expected US producer price index inflation. Hence, the market may only move sideways,” said Philstocks Financial Research Manager Japhet Tantiangco. 

He added that, “Next week, investors are also expected to watch out for the Federal Open Market Committee meeting for more clues on the Fed’s policy outlook. Aside from this, investors are also expected to watch out for the remainder of the fourth quarter and full year 2023 corporate results.”

Online brokerage 2Tradeasia.com said “The US Fed will convene (this) week, and while consensus has long been firm on a non-move on rates, comments about the timing of easing should fuel short-term speculation (at least from a macro standpoint).”

“A May cut is also getting uncertain albeit still fairly possible, which further confirms our earlier notes that investor sentiment is gradually coming back to earth, and that year-end 2023 aspirations did skew ambitious—now more pragmatic in light of apparently sticky inflation,” it noted.

2Tradeasia.coms aid “The PSEi cracked under selling pressure, falling back to 6,800 and further stressing how critical of a level 7,000 is. Strong events are needed to provide an impetus for bulls to fully breach this resistance. 

“Positive corporate results so far seem to only move the trading needle ever so slightly, and swings seem to still be tied to macro movements, particularly to headlines that affect cost of capital.”

However, the brokerage said that, “in the long-term, we underscore that there is still a sizable spread between value and price: forward price to earnings ratio is at 13 times, still lagging its historical average and arguably offers better upside versus composites in the region.”

For stock picks, COL Financial is recommending Ayala Corporation as is sees the firm’s shares as undervalued. 

“AC’s earnings have exceeded pre-pandemic level and is target to grow is earnings at an average rate of 16.6 percent to reach P65 billion by 2026. Meanwhile, AC’s share price is still 14 percent below 2019 and 25.4 percent below 2018. We view the disconnect in share price performance and earnings performance as an opportunity for investors,” the brokerage said. 

COL also reiterated its BUY rating on Jollibee because “We expect continued growth should the international segment see sustained improvement in profitability, underpinned by JFC’s leadership in the Philippines.”

Meanwhile, Abacus Securities Corporation is recommending Manila Water noting that, “Despite the stock’s recent jump, we believe there remains a substantial upside to reach our target price of P28.00.” 

“We believe consensus earnings estimates may see some upgrades, especially 2025, as the Wawa Dam is scheduled to be completed this year. This will increase water supply, which has been a constraint to billed volume growth. The stock is also still trading below its long-term mean P/E. There may also be boost from the potential sale of AC’s remaining interest in MWC,” it added.