After its steep eight-day fall, the local stock market will now be looking forward to the Monetary Board’s policy meeting later this week as it hopes for a statement that will trigger bargain-hunting among investors.
“The local market is seen to be exhibiting a bearish bias… With its decline, the market has already touched a new low for the year. It has also drawn near its support at the 6,150 level,” noted Philstocks Financial Research Manager Japhet Tantiangco.
He added “With its recent downturn, the market has been driven to more attractive levels. Thus, we may see some episodes of bargain hunting in next week’s trading.”
“However, we do not expect the market to stage a strong rally yet until investors hear positive narratives on the timing of the Bangko Sentral ng Pilipinas’ policy easing.”
Tantiangco explained that “Investors will be watching out for cues on the BSP’s [Bangko Sentral ng Pilipinas] monetary policy outlook. Hints of rate cuts soon may cause a turnaround in the market’s current direction. If there would be none however, the market may continue with its bearish bias.”
For its part, online brokerage 2Tradeasia.com said that “The BSP's Monetary Board will convene for the fourth time this year, although consensus points towards a non-move; at this point, comments related to the timing of any accommodative move is going to be overweight by market participants, especially in the context of ‘frustratingly sticky inflation’ remarks from the Fed earlier.”
Tantiangco added “Investors are also expected to monitor the Peso’s movement against the US Dollar. Sustained weakness of the local currency may weigh on market sentiment, especially on those of foreign investors.”
“A quick look at index constituents shows that 16 out of 30 PSEi members are trading at or within 10 percent of their 52-week lows, which opens up opportunities to range trade.
“Exercise vigilance over potential technical breaks below 6,000, but conscious of now more compelling multiples amid the pessimism,” 2Tradeasia.com advised investors.
For stock picks, among the choices of Abacus Securities Corporation is D&L Industries which “appears to have overcorrected after it went ex-dividend” as it closed at its lowest since December and significantly lower than the price before the cash dividend was announced.
“Of course, the overall market has been weak but the stock deserves more attention as its Batangas plant will be profitable in the next one or two quarters, the increase in bio-diesel blend will increase in October, and the peso's depreciation benefits the firm as a net exporter and as the share of exports grows over the next few years,” the brokerage said.
Despite current headwinds faced by most companies, Abacus believes several names still warrant a Buy recommendation, particularly now that the recent weakness has made valuations much cheaper.
“SM Investments Corporation and SM Prime Holdings are at historically low levels, even lower than the PSEi, and present significant upside…
“Unionbank's earnings should start to improve significantly in the second quarter now that the Citibank transition is complete and transition fees would no longer bloat its operating expenses.
“Its organic consumer loan business is also growing robustly, and the consumer-focus of its loan book should mitigate the negative pressure on net interest margins once the rate cut cycle starts later this year.
“This should also redound to the benefit of Aboitiz Equity Ventures, which will also see an earnings boost from a full quarter's contribution from recently consolidated Coke PH, the Mactan-Cebu airport, improving margins for its Foods Segment, and operational improvements and expansions for Aboitiz Power,” Abacus said.