While the 7,000 level is a strong resistance for the Philippine Stock Exchange index (PSEi), the local stock market is seen to continue its bullish trend specially in the light of expectations of a September rate cut by the US Federal Reserve.
“This week, the local market could still move with an upward bias. The monetary policy easing cues from the Federal Reserve in the Jackson Hole Economic Symposium is expected to drive positive sentiment,” said Philstocks Financial Research Manager Japhet Tantiangco.
He explained that, “Fed rate cuts are seen to give more room to the BSP (Bangko Sentral ng Pilipinas) to cut their policy rates too, thereby increasing the likelihood that they will continue with their monetary policy easing.”
“The strengthening of the local currency, if it continues, is also expected to give the market a boost,” said Tantiangco.
Online brokerage 2TradeAsia.com said “The probability of a September rate cut shot up after the release of the US Fed's July meeting minutes earlier this week, which showed officials being more unanimous towards easing and having less issue with a potential restart of the inflation cycle.”
“August inflation data, plus jobs data, should solidify the magnitude with which the Fed should move for the rest of the year —note that consensus is starting to contemplate two to three rate cuts within September to December, which implies a target range of 4.50 percent to 4.75 percent rate by the end of the year (75ps total reduction),” it added.
2TradeAsia.com pointed out that, “Momentum is on the side of the PSEi, getting impetus from the BSP's 'ahead of the Fed' rate cut this month. As more pressure is put on central banks to keep in step with what could be rapid fire Fed rate cuts in late third quarter to the fourth quarter, this tailwind should be sustained in the medium-term for the more cyclically-aligned PSEi.”
For stock picks, COL Financial has upgrade Vista Land & Lifescapes from HOLD to BUY after noting that, since the third quarter of 2023, VLL has registered year-on-year growth in sales.
“Take-up sales as also been robust, which should support revenues going forward. Interest rates are also expected to come down soon and this will help boost sales of residential projects, especially for the mid to affordable income segments” it added.
Meanwhile, leasing revenues are stable for VLL and account for around 45 percent of revenues. This gives VLL a steady source of income and cashflow to support its property development business.
“In addition to improved fundamentals, VLL is trading at very low valuations,” it added.
COL also has a BUY rating on COSCO because “the stock remains severely undervalued, with the market not valuing its other businesses (apart from PGOLD) like the fast-growing liquor business, in our view.”
Also in its radar is Security Bank which COL expects “to be one of the beneficiaries of the country’s economic growth as it continues to grow its intermediation business.
“The bank’s high capital ratios and liquid balance sheet will allow it to pursue such opportunities for growth in the medium term.
“Furthermore, investments that the bank is currently making in people and technology are expected to come online within the next few years, potentially leading to improved profitability.”