The local stock market is seen to continue riding on optimism this week due to the Bangko Sentral rate (BSP) cut and expectations that the US Federal Reserve may start reducing rates by September.
Philstocks Financial Research Manager Japhet Tantiangco said that, while the local market had a good run last week, it is still seen to be undervalued from a fundamental standpoint.
“Hence, we still see room for advancement,” he noted, adding that technical data also implies that the market has taken on a bullish momentum.
Tantiangco said, “Together with the prospect of more monetary policy easing moving forward, we may see the market climb further next week. Easing recession worries in the US, if it continues, is also expected to help the local bourse.”
For its part, online brokerage 2TradeAsia.com said, “A September rate cut from the Fed is now being priced in with more certainty after US inflation eased to 2.9 percent in July.”
It pointed out though that “there is still one month of inflation data (August, reporting on Sept. 11) before the US Fed's September meeting (Sept. 17 to 18) that could technically sway the needle, but the 4-month inflation downtrend has only solidified calls for more stimulatory action from the Fed.”
“There is a clear upward bias to market movements as rate cuts-locally and abroad - have turned in favor of risk assets.
“The dying out of the 'higher-for-longer’ view on global interest rates may be the impetus the PSEi needs to approach 7,000 in the medium-term, but it is important to keep pace and not get lost in the exuberance,” the brokerage said.
For stock picks, both COL Financial and Abacus Securities Corporation have BUY ratings for D&L Industries, which reported higher earnings for the first half, backed by rising exports and the operation of its new Batangas plant.
“We expect earnings recovery for DNL to be sustained amid peaking inflation and recovery in household spending. We also like the stock given the improving outlook for Chemrez in light of the energy department’s renewed push to hike the minimum biodiesel blend requirement.
“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.
Abacus said growth signs are there but “it's just not translating yet in terms of the company's bottom line. Not yet.” It noted that, sales growth in the second quarter was up 30 percent.
“The Batangas plant turned a profit last quarter, earlier than anticipated by management. Exports (a hedge against the Peso's weakness) accounted for 33 percent of revenues which is a record high,” Abacus added.
It advised clients to “stay the course on the stock. Expectations are likely to be met for the second half of 2024 and we believe 2025 consensus now appears too pessimistic.”
COL also has a BUY rating on PLDT because “We continue to like TEL for its leadership in the fixed line and enterprise segments as well as its consistent dividend policy. At its current price, dividend yield is very attractive at 6.6 percent.”
The brokerage also has a BUY rating on First Philippine Holdings as “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 P124 per share. Based on FPH’s market price of P62 per share, upside to our fair value estimate is significant at 145 percent.”