Local stocks are seen to be ripe for bargain hunting during the first week of the Chinese Ghost Month, but investor sentiment will be swayed mainly by a slew of important economic data and corporate earnings reports.
“The local market is still deemed to be undervalued and, with the two-week decline, a bargain-hunting fueled rise is seen likely in the week’s trading,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted, “Growing hopes of monetary easing in the Philippines and the US soon, following recent dovish cues from both the Bangko Sentral ng Pilipinas and the Federal Reserve, may help the market climb. However, the recession fears in the US, if it lingers, is seen as a downside risk to the local bourse.”
While markets have already priced in a fall rate cut by the US Federal Reserve, 2TradeAsia.com warned that “Potential wildcards in the very near term include volatile jobs and CPI data next week.”
This is in the light of disappointing US manufacturing (eight-month low), which has already begun to spook risky markets, especially tech stocks, that are already weighed down by earnings misses.
“Investors may also take cues from our upcoming macroeconomic data including the July inflation rate, June labor force survey, and second quarter gross domestic product (GDP). Investors are also expected to continue monitoring the second quarter and first half corporate results,” Tangiangco added.
2TradeAsia.com said “July inflation release (Aug. 6) is going to set the complexion for early August, amid prospects of an August rate cut from the BSP (next Monetary Board meeting is on Aug 15).”
It noted that, “Recent typhoons have rightly pushed the BSP to adjust for July inflation expectations: to 4 percent to 4.8 percent, breaking 7 straight months of falling within the target range, pressured by the impact of Typhoon Carina.”
“Expect heightened volatility in the coming sessions as participants hone in on a to-be/not-to-be August local cut, in time with corporate earnings results (mostly positive so far),” the brokerage said.
2TradeAsia.com advises investors that, “additional caution is underscored, given the capricious nature of trading alongside the market's reaction to new inflation/rate/jobs data.”
For stock picks, both COL Financial and Abacus Securities and Exchange Commission have BUY ratings for BDO Unibank which recently reported strong growth for the second quarter.
“We like BDO as we believe that it is well-positioned for growth, even amidst challenging economic conditions, with its liquid balance sheet and wide branch network.
“While interest rates remain elevated, BDO’s strong deposit franchise will play a key role in managing NIM (net income margin) and enhancing profitability.
Meanwhile, in the face of impending rate cuts, we believe that BDO has implemented enough changes to defend against downward pressures on NIM,” said COL.
For its part, Abacus cited BDO’s sustained loan growth “which was way ahead of industry average... mostly due to a pick up in growth in middle market loans to double digits.”
Non-interest income likewise saw strong growth, on higher business volume and insurance premiums.
Meanwhile, COL said Ayala Corporation may get a boost from talks of a possible sale of a minority stake in AC Health “as it will help cement the value of AC Health which the market is most likely underappreciating given its discount to net asset value.”