This week, stock market investors will be waiting for the release of the May inflation numbers as well as the labor market data while also keeping an eye on the peso-US dollar exchange rate.

Philstocks Financial Research Manager Japhet Tantiangco said that there may also be some bargain-hunting as many stocks are now at attractive levels following the drops in share prices last week.

“However, (the market’s) direction is still expected to depend on upcoming data. The local currency, which has been a concern last week, if it continues to weaken, poses downside risks to the bourse," he said.

“Investors are also expected to watch out for the Philippines’ May inflation data. An inflation print faster than the preceding month’s 3.8 percent, especially one that breaches the upper end of the government’s 2 percent to 4 percent target, may also weigh on market sentiment. Investors may also watch out for our upcoming April labor market data for clues on the strength of our local economy,” he also noted.

Meanwhile, online brokerage 2Tradeasia.com said the release of the local inflation number for May will set the stage for the Bangko Sentral ng Pilipinas' rate cycle move -- if any -- in its June Monetary Board meeting.

“Expected range (for inflation) is at 3.7 percent to 4.5 percent (from April's 3.8 percent), it said adding that, “the negative bias attributable to higher energy rates and agri prices, as well as the impact of peso depreciation (in tandem with seasonal drivers, i.e. summer, academic year-end, among others),” it said.

It likewise noted that “continuation of inflation and interest rate sensitivity should keep plays limited to value and dividends, and growth is isolated to specific sector or corporate stories.”

With optimism for two to four rate cuts this year having evaporated, 2Tradeasia.com said the PSEi dropped to its year-to-date low early last week and advised that bargain hunters and dividend yield optimizers should enjoy buying windows around the 52-week lows.

For stock picks, Abacus Securities Corporation strongly recommends SM Investments Corporation after its share price fell last week due to the MSCI rebalancing.

“For all the talk about how bad the results of its retail arm was in the first quarter, consensus estimates for SM have not moved significantly. Compared to end March, the current 2024 EPS on Bloomberg is down just 1.9 percent," said Abacus Securities.

“The 10 percent drop in the share price quarter-to-date, therefore, seems out of line, and may only be because of the MSCI rebalancing… which takes effect at the end of Friday's trading," it added.

"We also want to point out that at 12.1 times forward earnings, SM is trading near the bottom of its 10-year valuation range. Our advice, therefore, is to buy the stock heavily (after it got) sold down at the end of the week,” said the brokerage firm.

For COL Financial, Manila Water Company is a BUY after the brokerage upgraded its fair value estimate for the stock “as we account for lower-than-expected expenses. Notably, we are reducing our forecast for tax, professional fees and repair and maintenance costs, while increasing our estimate for interest expense."

“Overall, we've raised our net income forecast for 2024 and 2025 by 4.6 percent and 3.3 percent, respectively. Despite the stock’s price appreciating by 48.0 percent year-to-date, we maintain our BUY rating for MWC,” said COL.