The local stock market has turned more optimistic with robust first quarter corporate results, below-expected April inflation data in the US, and hopes of policy easing cues from the Bangko Sentral ng Pilipinas.
“At its current level, the local market is still deemed to be attractive. Hence, episodes of bargain hunting are still possible in next week’s trading,” said Philstocks Financial Research Manager Japhet Tantiangco.
He added that “the prospects of a possible rate cut by the BSP as early as August following their less hawkish stance in their latest meeting may also continue to give sentiment a boost next week. With these, the market could move with an upward bias. Next week, investors are also expected to continue digesting first quarter corporate results.”
Online brokerage 2Tradea said, “recent dovish comments, particularly on a potential rate as early as August-with one or two rate cuts within the second semester of 2024, sized between 25 - 50bps per cut-has fueled optimism back to local risk assets in what could be the impetus needed to get the index back up to the 7,000 zone.”
“We retain the view that expectations must be tempered as ultimately inflation approaching two percent is what is going to dictate rate cycle changes; disappointment from past 'deferral' of rate hikes might also drive weaker rallies hinged on a third quarter pivot. That being said, there is some case for better second half environment as inflation forecasts continue to drop,” it added.
The brokerage advised investors to range trade and pick up on tradeable corporate stories in the interim while waiting for the currently inert broader market to catch fire.
For stock picks, COL Financial has a BUY rating on Chinabank because “we continue to like CHIB because we expect the bank’s lending business to continue growing alongside the Philippine economy. Going forward, we see potential upside on net interest margin.
“In the event that the BSP cuts its key policy rate in the second half of 2024, CHIB’s asset yield should be stickier than its cost of funding, given the growing proportion of consumer loans and the build-up of investment securities," it said.
“Moreover, continued prudent management of costs and asset quality should enhance profitability. Ultimately, we see CHIB as an attractive investment opportunity,” it explained.
For Abacus Securities Corporation, SM Investments is a BUY especially with its premium over the PSEi near the lowest in about 10 years.
“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,” the brokerage said.