With the local stock market on a seven-day losing streak, there may be some bouts of bargain-hunting this week although investor sentiment will continue to be dampened by concern over rising inflation and its impact on interest rates.

“The local market turned more bearish as it breached the 6,700 level last week, a line considered as a support. The local market is now on a 7-day losing streak, trimming its gains for the year to 3.25 percent,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted that “the local market is currently at a price-to-earnings ratio of 13.3 times, lower compared to its 2019 to 2023 average of 18.2 times. At its current position, bargain opportunities are seen. Hence, next week, we may see episodes of bargain hunting.”

“However, worries over the Philippines’ inflation and interest outlook are expected to persist which in turn may continue to weigh on the market. This comes amid the mounting inflationary risks which raises the possibility of a delayed rate cut by the Bangko Sentral ng Pilipinas," he added. 

“Concerns over the possibility of a delayed rate cut by the Federal Reserve amid the US’ inflation picture may also dampen sentiment. Hence, for next week, we may see sideways movement from the local bourse,” Tantiangco also said.

Online brokerage 2Tradeasia.com said, “futures markets are now pricing in a fading probability of a June rate cut (down to 21 percent from 73 percent last month), pushing a more probable September 2024 cut."

“This aligns with our view from December that rates may come later than originally communicated, and rates are not coming down until high inflation fully relaxes into the 2 percent range,” it also said.

It added that “an upward adjustment on the BSP's 2024 inflation forecast to 4 percent (from 3.9 percent) is the icing on top of this quarter's hawkish cake. This forecast pushes the CPI at the top end of the 2 percent to 4 percent target, driven by worsening upside risks. This higher inflation path mirrors a potential third quarter cut in time with what is implied by US Fed.”

For stock picks, COL Financial has BUY recommendations for both First Philippine Holdings Corporation (FPH) and its subsidiary First Gen Corporation (FGEN).

“We are maintaining our BUY rating on FPH. Given FPH’s 68 percent ownership in FGEN, we view FPH as a cheaper way to own FGEN. FPH is trading at a huge 50 percent discount to its market-based net asset value of P131 per share,” COL said. 

The stock brokerage also has a BUY rating on FGEN “given its relatively stable cash flow since bulk of its capacity is contracted. 

“Furthermore, with the Department of Energy’s moratorium on new coal power plants, this could potentially push forward the projected power shortage beginning in 2024, increase in the competitiveness of FGEN’s gas and renewables plants, and improve the feasibility of FGEN’s LNG regasification project which will enable its gas plants to remain viable after the depletion of the Malampaya gas field,” it added.