Investors in the local stock market will be taking cues from the Bangko Sentral ng Pilipinas policy meeting this week.

“The BSP is expected to keep rates steady (in its meeting on May 16), but stubborn inflation figures in April is making the speculation more interesting especially in light of newly announced disappointing first quarter gross domestic product,” said online brokerage 2Tradeasia.com. 

It noted that, “Probability of a rate cut by June as initially communicated by the BSP is gradually evaporating in light of high US inflation and the Fed moving rate cuts further into the year.”

“Our then-conservative outlook that rates may not move until late into the year is being supported by new data points, which puts pressure in growth and alpha plays in equities,” the brokerage said.

While sentiment is being weighed down by high inflation and weak economic growth, 2Tradeasia.com said “solace is found in valuations that remain ultra-low, especially when taken earnings growth and passive yield into account.”

It thus advises investors to engage in range trading while the index seeks stronger identity above the 6,500 zone. Immediate support is 6,400, resistance is at 6,700 to 6,800.

For stock picks, Abacus Securities Corporation is recommending SM Investments and SM Prime Holdings noting that, “Overall, we believe the conglomerate will be able to meet the consensus growth of 10 percent this year. Note also that SM continues to be one of the best performing conglomerates in terms of earnings recovery from the pandemic.”

On the other hand, the brokerage said the recent selldown in SM Prime’s shares has brought the stock’s valuations to attractive levels as it is now more than two standard deviations below its historical average.

COL Financial has a BUY rating on DMCI Holdings because it is trading at a 2024 price-to-earnings ratio of 5.5 times, below its historical PE ratio of 11.2 times and because it provides a very high dividend yield.

Meanwhile, both COL and Abacus have BUY ratings for D&L Industries with COL noting that, “despite headwinds from sluggish consumer sentiment and rising cost pressures in recent months, we believe that moderating inflation and the expected recovery in household spending this year should sustain earnings recovery moving forward.”

“Furthermore, DNL’s long-term growth prospects remain attractive as we expect the significant capacity expansion from its new Batangas facility will allow DNL to scale its export business over the next few years,” it added.

For its part, Abacus said D&L’s exports have started to ramp up growing ahead of the weakness from last year with the driver in the new Batangas expansion plant.

“The second half should be better for DNL as interest rates and inflation are likely to taper off gradually. Key developments to anticipate this year remain to be the Biodiesel blend that will significantly demand on DNL's side leading to better topline and margins as well as the company's continuous ramp up in its new plant,” it added.